- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
Foreign Bond Funds
- --------------------------------------------------------------------------------
December 31, 1998
- --------------------------------------------------------------------------------
REPORT HIGHLIGHTS
================================================================================
* After a sharp third quarter decline following Russia's devaluation in
August, lower-quality and emerging market debt rallied strongly in the
fourth quarter.
* Higher-quality bonds posted strong returns and interest rates declined,
though flight-to-safety buying eased late in the year.
* The International Bond and Global Bond funds posted solid 12-month returns
of 15.03% and 11.93%, respectively, but lagged their benchmarks. The
Emerging Markets Bond Fund had a disap-pointing year; its -23.09% return
significantly trailed its benchmark.
* The environment for bonds remains favorable, with inflation nowhere on the
horizon. The dollar is likely to remain under pressure. Emerging market
bonds offer attractively high yields.
================================================================================
FELLOW SHAREHOLDERS
As in the previous year, the major events affecting financial markets in
1998 occurred in the second half. Whereas in 1997 it was Asia's currency
collapse, last year it was Russia's debt default and currency devaluation. The
Russian default started a chain of events that pushed down prices of all but the
highest-quality bonds before a succession of three Federal Reserve interest rate
cuts restored confidence to the markets. Emerging market bonds fell sharply,
while dollar-bloc and European government bonds rallied strongly. The funds
reflected this disparity, as the International Bond and Global Bond funds posted
strong absolute results, while the Emerging Markets Bond Fund declined
significantly.
<PAGE>
MARKET ENVIRONMENT
================================================================================
Developed Markets Performance
In Local In U.S.
6 Months Ended 12/31/98 Currency Dollars
- ----------------------- -------- -------
Australia 5.38% 4.37%
France 7.26 16.09
Germany 6.30 15.19
Italy 7.28 15.65
Japan -1.99 20.58
Spain 7.31 15.94
United Kingdom 13.04 12.72
United States 5.75 5.75
Source: J. P. Morgan.
================================================================================
Prices of developed country government bonds continued to rise through- out
1998. The downward trend in the yields of these bonds, which had previously been
driven by declining global inflation, picked up steam in midyear as investors
fled to high-quality securities. Investors drove yields on long-term U.S.
Treasuries to their lowest levels in 30 years. Key European central banks also
cut interest rates prior to Economic and Monetary Union (EMU), which took effect
January 1, 1999. The Russian crisis once again cast a pall over emerging market
debt and increased concerns that the global economy would falter, threatening
the profits of corporate bond issuers. The stream of good news about inflation
continued throughout the year. The global economy is saddled with excess
capacity, and commodity prices collapsed in part because of declining Asian
demand. Despite stronger-than-expected U.S. economic growth and low
unemployment, there were no upward price pressures to speak of.
================================================================================
Preparing For The Year 2000
- --------------------------------------------------------------------------------
The Year 2000 draws closer every day, and it holds special meaning beyond
the arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
T. Rowe Price has been taking steps to assure that its computer systems and
processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
<PAGE>
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all
new systems process and store four-digit years. All critical systems have been
reprogrammed (including business applications required to service our customers
and processing infrastructure necessary to ensure the integrity of customer data
and investments), and they are currently being tested. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year 2000
compliance status, with the expectation that some organizations will not be able
to modify their interface files prior to December 31, 1999. In addition, we are
scheduling tests for critical vendors and companies that claim Year 2000
compliance to ensure that time-related data and calculations function properly
as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition
into the next millennium. We are assessing all systems providing products or
services to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we have modified them where necessary for the Year 2000.
The Securities Industry Association (SIA) is coordinating Year 2000 testing
to assure that securities markets, clearing corporations, depositories, and
third party service providers can send, receive, and process files and
transactions accurately. In late July 1998, the SIA completed a beta test of
Year 2000 readiness. The test was considered successful in terms of transactions
completed and will serve as the basis for the SIA's industry-wide approach.
During October 1998, T. Rowe Price completed its beta test of Year 2000
readiness with the SIA and is ready for the industry-wide test that is scheduled
for March and April 1999.
For a more detailed discussion of our Year 2000 effort, as well as
continuing updates on our progress, please check our Web site
(WWW.TROWEPRICE.COM).
================================================================================
The bond market environment was also bolstered by the prospect of a smooth
launch for EMU and the euro. Increased price transparency in Europe due to the
euro was expected to bring disinflationary benefits. By year-end, inflation in
the 11 countries that inaugurated EMU on January 1 had fallen below 1%. A
leftward shift in the German government caused some concern in September;
however, there were no significant policy changes. The arrival of the euro does
not by itself have any effect on the share price of either the International
Bond Fund or the Global Bond Fund. But EMU does have compelling long-term
benefits, in our view, not only in terms of lower inflation but also in the
development of a healthy, Continent-wide bond market. EMU should open up new
opportunities for corporate borrowers and, as such, should benefit bond funds
such as ours.
================================================================================
<PAGE>
Emerging Markets Performance
- --------------------------------------------------------------------------------
In U.S.
6 Months Ended 12/31/98 Dollars
- ----------------------- -------
Emerging Markets Bond Index Plus -13.42%
Brady Indexes (by issuer): *
Argentina -0.47
Brazil -14.67
Mexico -2.37
Poland 4.92
Venezuela -13.82
* 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.
Source: J. P. Morgan.
================================================================================
In both the U.S. and Europe, fiscal discipline enhanced the picture for
government bonds, as it resulted in reduced supply. Such was not the case in
Japan, where bond yields reversed a long down trend and began to rise sharply in
the latter part of the year. The massive bond issuance required to pay for
repeated attempts to boost the Japanese economy had taken its toll. Exacerbating
the situation was the government's announcement that it would be unable to buy
as much of this supply as it had in the past.
Prior to August, market volatility was relatively low. All that changed
following Russia's crisis. Hedge funds, some of which had used leverage to a
staggering degree in betting on emerging market debt, scrambled to unwind these
positions and to sell their more liquid assets to raise capital. With investors
focusing on credit safety, demand for higher-yielding securities, including
lower-quality corporate bonds, evaporated. This loss of liquidity -- too many
lower-rat ed bonds for sale and too few buyers -- prompted the Federal Reserve
to orchestrate a bailout of one prominent hedge fund and, six days later, to
initiate a series of interest rate cuts.
The Fed's actions, followed later in the year by rate cuts in Europe,
injected liquidity into corporate bond markets and also helped emerging market
debt recover from its sharply depressed levels. The volatility of the emerging
debt market is illustrated by the fact that the J.P. Morgan Emerging Markets
Bond Index Plus rallied nearly 10% in the final quarter but was still down 14%
for the year. Given these events, all major government bond markets posted
positive returns. The leading performers in local-currency terms were in Europe,
where the U.K. market was the best performer, up almost 20%. In contrast,
Japanese bonds returned less than 1%.
<PAGE>
One of the major consequences of the Fed's action and slowing foreign
economies has been a deteriorating outlook for the U.S. trade balance and
consequently the dollar. The unwinding of hedge fund activities also caused some
strength in the yen, and later in the year repatriation by Japanese institutions
added to the rally. The U.S. dollar ended 1998 weaker against most major
currencies by between 7% and 15%. The greenback rose about 6%, however, against
the Australian and Canadian dollars, which were both hurt by falling commodity
prices. The weaker U.S. currency boosted returns on foreign-currency denominated
assets, with many European bond markets up over 20% in dollar terms for the
year.
GLOBAL BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/98 6 Months 12 Months
- ---------------------- -------- ---------
Global Bond Fund * 8.34% 11.93%
J.P Morgan Global Government
Bond Index (unhedged) 11.67 15.32
* As previously reported, we changed the fund's name from Global Government
Bond Fund on May 1, 1998, to more accurately reflect the composition of the
portfolio.
================================================================================
Your fund provided solid returns over the past six and 12 months of 8.34%
and 11.93%, respectively. The difference between the fund and the benchmark
index was largely the result of two factors: overweighting in emerging market
debt compared with the index, and underweighting in Japan. Our relative lack of
exposure to Japan, which has benefited the fund in the past, hurt performance
during the yen's substantial fourth quarter rally. Nevertheless, we maintained
this stance in the second half as we saw no economic rebound in Japan and found
other bond markets more attractive. In fact, the yen's strength was partially
offset by the poor returns on Japanese bonds in 1998. We boosted our yen
exposure through forward contracts even as we remained underweight in Japanese
securities. Thus, the fund's total yen exposure of 11.3% at the end of the year
was significantly greater than its actual holdings of Japanese bonds, which
represent just 1% of the portfolio. Given the expense of such hedging, however,
we limited its use, and our yen weighting remained below that of our benchmark.
[Pie chart with the following wedges (in order): United States, 48%;
Germany, 13; United Kingdom, 7%; Italy, 6%; Denmark, 4%; Greece, 3%; Spain, 3%;
Other and Reserves, 16%.]
<PAGE>
On the positive side, our decision earlier this year to extend duration in
the European and U.S. markets boosted performance as interest rates declined
there. (Duration measures a bond fund's sensitivity to interest rates. For
example, the share price of a fund with a duration of six years will rise about
6% in response to a one-percentage-point decline in rates and fall about 6% in
response to an equivalent increase in rates.) Average duration began 1998 at six
years, rose to 6.7 years by June 30, and moderated to 6.4 years by year-end. We
shifted our interest rate sensitivity from euro countries to those not
participating in the first round of EMU, such as Denmark, Greece, Sweden, and
the U.K. (although we have reduced our exposure to the British pound and remain
underweight because we expect the euro to strengthen). Our total exposure, as of
December 31, to currencies about to be merged into the euro was about 41%. We
also reduced our weighting in the bonds of international banks denominated in
British pounds, on concerns about the quality of their loan portfolios. Our 3%
position in Greece, initiated early last year, boosted performance
significantly, as Greece is not represented in the benchmark. Greek debt
performed well as the country strove to qualify for the next round of monetary
convergence.
While we were moderately successful investing in nongovernment issues in
the U.S., we enhanced returns by maintaining very little exposure to
nongovernments in Europe. Our analysis convinced us that European government
debt was a better value, and, indeed, government bonds outperformed corporates
in Europe last year. As a result, in spite of our 5% allocation to emerging
market bonds, the portfolio's overall credit quality rose modestly, from AA six
months ago to AA+ at year-end. (See the Portfolio Highlights table on page 12.)
Total exposure to Russian debt, about 1% of net assets six months ago, is now
negligible. Given overall low nominal yields worldwide, however, we continue to
believe higher-yielding debt securities are worth including in the fund.
INTERNATIONAL BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/98 6 Months 12 Months
- ---------------------- -------- ---------
International Bond Fund 11.93% 15.03%
J.P Morgan Non-U.S. Dollar
Government Bond Index 15.22 18.28
================================================================================
<PAGE>
The International Bond Fund had strong returns of 11.93% and 15.03% for the
past 6- and 12-month periods, respectively, but still lagged its unmanaged
benchmark, as shown in the table. Absolute returns were aided by the weakening
U.S. dollar, as both the fund and its benchmark focus on nondollar bonds. As
with the Global Bond Fund, which we run in a similar fashion, our shortfall
compared with the index occurred entirely in the second half and was largely the
result of our overweighting in emerging market debt and underweighting in Japan.
Our small exposure to Japan compared with the index, which has benefited the
fund in the past, hurt the fund during the yen's substantial fourth quarter
rally. We have maintained this stance since we see no economic rebound in Japan,
and find other bond markets more attractive. To be sure, the yen's strength was
partially offset by the poor returns on Japanese bonds in 1998. We boosted our
yen exposure through forward contracts even as we remained underweight in
Japanese securities. Thus, the fund's total yen exposure of 17% at the end of
the year was significantly greater than its actual holdings of Japanese bonds:
8% of net assets. Given the expense of such hedging, however, we limited its
use, and our yen weighting remained below that of our benchmark.
[Pie chart with the following wedges (in order): Germany, 22%; United
Kingdom, 11%; Italy, 10%; Japan, 8%; European Currency Unit, 7%; United States,
7%; Spain, 5%; Other and Reserves, 30%.]
On the positive side, our decision earlier this year to extend duration in
the European markets boosted performance as interest rates declined there.
(Duration measures a bond fund's sensitivity to interest rates. For example, the
share price of a fund with a duration of six years will rise about 6% in
response to a one-percentage-point decline in rates and fall about 6% in
response to an equivalent increase in rates.) The fund's average duration began
1998 at 5.5 years, rose to 5.9 years by June 30, and is now at 6.1 years. We
shifted our interest rate sensitivity from euro countries to those not
participating in the first round of EMU, such as Denmark, Greece, Sweden, and
the U.K. (although we have reduced our exposure to the British pound and remain
underweight because we forecast a strengthening euro). At year-end, our exposure
to currencies about to be merged into the euro totaled about 56%. We also
reduced our holdings in the debt of major international banks denominated in
British pounds, on concerns about the exposure of such banks to questionable
loans. Our small position in Greece, initiated early last year, boosted
performance significantly, as Greece is not represented in our index. Greek
bonds posted strong results as that nation showed its determination to qualify
for the next round of monetary union. We enhanced returns by maintaining very
little exposure to nongovernment bonds in Europe. We felt European government
debt was a better value, and, in fact, government bonds outperformed corporates
in Europe last year. Therefore, despite the small allocation to e merging market
debt (about 6%), the portfolio's overall credit quality rose modestly, from AA
six months ago to AA+ at year-end. (See the Portfolio Highlights table on page
12.) Total exposure to Russian debt, about 1% of net assets six months ago, is
now negligible. Given overall low nominal yields worldwide, however, we continue
to believe higher-yielding debt securities are worth including in the fund.
During the difficult global environment of the third quarter, we took a 5%
position in U.S. Treasury bonds to provide some protection for the fund. It was
an unusual step, but the late summer was clearly an exceptional period. As the
environment improved in the fourth quarter, we sold the Treasuries.
<PAGE>
EMERGING MARKETS BOND FUND
================================================================================
Performance Comparison
- --------------------------------------------------------------------------------
Periods Ended 12/31/98 6 Months 12 Months
- ---------------------- -------- ---------
Emerging Markets Bond Fund -21.16% -23.09%
J.P Morgan Emerging Markets
Bond Index Plus -13.42 -14.35
================================================================================
The past year was difficult for your fund. For the 6- and 12-month periods
ended December 31, 1998, the Emerging Markets Bond Fund returned -21.16% and
- -23.09%, respectively. These results were significantly below our benchmark's
return, as shown in the table. Our overweighting in Russia, where we had 19% of
net assets six months ago, hurt performance. Exposure to Russian debt is now
about 3.5%. The government's capitulation in August tainted all emerging market
debt, but left Russia as the world's worst-performing sovereign bond market.
During the year we had maintained our overweight position because we felt that
economic reform was desirable internally and externally. Would international
agencies have steered a different course in dealing with Russia if they had
known the effect that failure would have on the global economy? What's done is
done, and our question will never be answered. In hindsight, we underestimated
the lack of political resolve within Russia to continue the reform process. This
lack of resolve cost Sergei Kiriyenko his job as prime minister and contributed
to the diminution of Boris Yeltsin's role as president.
[Pie chart with the following wedges (in order): Argentina, 18%; Brazil,
12%; Nigeria, 9%; Bulgaria, 8%; Poland, 5%; Peru, 5%; Mexico, 5%; Other and
Reserves, 38%.]
On the other side of the ledger, our overweight allocations to the
sovereign debt of Poland, Bulgaria, Nigeria, and Ivory Coast boosted our
relative returns. Our recent emphasis has been to shift away from countries
likely to be large and perennial borrowers at a time when capital can be hard to
obtain. Poland, Bulgaria, and the Ivory Coast were apt pupils of International
Monetary Fund doctrine and did not make heavy new borrowing demands on the
capital markets. In Nigeria, due to a change of leadership following the death
of General Abacha, there was a significant move in the direction of democracy.
Our underweight position in Mexico and Brazil also aided results. Late in the
year, our major shift was out of Latin American bonds -- particularly those of
Mexico -- and into South African debt. In addition, an extended duration
strategy benefited performance, although average duration has been reduced to
5.1 years from 5.3 years on June 30. The fund continued to be diversified (with
23 countries represented compared with 13 for the index), and its credit rating
remained at BB+. (See the Portfolio Highlights table on page 13.) Given overall
low nominal yields worldwide and the premium currently accorded riskier bonds,
we continue to believe that emerging market debt is an attractive investment.
<PAGE>
OUTLOOK
Our outlook for bonds remains positive. There appears to be little to
disturb the benign environment for inflation and the fixed income markets. There
could be further interest rate cuts in Western economies in response to even
lower inflation. Bond yields could fall further. However, each year usually
brings a fresh surprise. While it's difficult to guess what this year's will be,
one shadow on the horizon is the recent escalation in protectionist rhetoric
from the U.S., aimed particularly at Japan. An outbreak of trade tensions or the
imposition of trade barriers would unsettle our positive outlook for bonds and
inflation.
============================
An outbreak of trade
tensions or the
imposition of trade
barriers would unsettle
our positive outlook
for bonds and inflation.
============================
U.S. Treasury yields are low in nominal terms, but real interest rates
(adjusted for inflation) are not unusually low in historical terms. Corporations
(and developing countries) are likely to be large issuers this year due to last
year's third quarter credit crunch. Because of its much-improved fiscal
position, the U.S. government will not be a heavy issuer. The marked difference
in supply between government and nongovernment sectors may be partially offset
by better demand for higher-yielding assets in a low-yield environment. Still,
the supply picture suggests that the yield advantages of riskier corporates and
emerging market bonds over Treasuries are not likely to narrow substantially.
The dollar will likely continue under pressure due to the U.S. current account
deficit and the emergence of a solid euro.
Were main wary of Japan but feel confident maintaining moderately long
duration elsewhere, especially in Europe. Further price gains there may see us
temper that position to reflect any contraction in real interest rates. The euro
has gotten off to a solid start, as we expected. Demand for the euro either as a
reserve currency or as an investment vehicle is likely to ensure at least a mild
appreciation. The pricing of goods and services in a single currency should
continue to exert downward pressure on prices, and inflation in the euro
countries could edge further toward zero. Of minor concern to the low-inflation
picture in the first quarter would be high union wage demands in Germany and the
likelihood that major commodity price declines are behind us.
Brazil is key -- and we think the industrialized nations and the IMF
realize this. A mild recession following January's currency devaluation would do
nothing to ease the debt burden without a substantial reduction in interest
rates. Up to now, inflation has been close to zero. If the Brazilians continue
to demonstrate fiscal rigor, the international community should find ways to
help bring down interest rates to single figures. Lower rates would cure fiscal
and current account deficit problems at the same time. With world growth
slowing, a faster-than-expected turnaround for Brazil would help. If the proper
measures are not taken soon, however, Brazil's crisis could bring contagion full
circle, threatening a new round of currency devaluations -- with China and Hong
Kong under renewed pressure. On the bright side, international authorities
appear to have learned from the experiences of late 1997 and 1998. We continue
to favor higher-quality corporates and modest exposure to emerging market bonds
due to their attractive yields.
Respectfully submitted,
/s/
Peter B. Askew
Executive Vice President
January 25, 1999
================================================================================
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
6/30/98 12/31/98
------- --------
Global Bond Fund
================================================================================
Price Per Share $ 9.95 $10.51
- ----------------------------------------------------------------------
Dividends Per Share
- ----------------------------------------------------------------------
For 6 months 0.28 0.25
- ----------------------------------------------------------------------
For 12 months 0.50 0.53
- ----------------------------------------------------------------------
Dividend Yield *
- ----------------------------------------------------------------------
For 6 months 5.67% 5.01%
- ----------------------------------------------------------------------
For 12 months 5.53 5.40
- ----------------------------------------------------------------------
Weighted Average Maturity (years) 11.5 10.0
- ----------------------------------------------------------------------
Weighted Average Effective
Duration (years) 6.7 6.4
- ----------------------------------------------------------------------
Weighted Average Quality ** AA AA+
- ----------------------------------------------------------------------
International Bond Fund
================================================================================
Price Per Share $ 9.58 $10.46
- ----------------------------------------------------------------------
Dividends Per Share
- ----------------------------------------------------------------------
For 6 months 0.26 0.25
- ----------------------------------------------------------------------
For 12 months 0.45 0.51
- ----------------------------------------------------------------------
Dividend Yield *
- ----------------------------------------------------------------------
For 6 months 5.60% 4.91%
- ----------------------------------------------------------------------
For 12 months 5.48 5.31
- ----------------------------------------------------------------------
Weighted Average Maturity (years) 9.9 9.0
- ----------------------------------------------------------------------
Weighted Average Effective
Duration (years) 5.9 6.1
- ----------------------------------------------------------------------
Weighted Average Quality ** AA AA+
<PAGE>
(continued on next page)
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Portfolio Highlights
KEY STATISTICS
6/30/98 12/31/98
------- --------
Emerging Markets Bond Fund
===============================================================================
Price Per Share $12.55 $ 9.23
- -------------------------------------------------------------------------
Dividends Per Share
- -------------------------------------------------------------------------
For 6 months 0.66 0.65
- -------------------------------------------------------------------------
For 12 months 1.28 1.31
- -------------------------------------------------------------------------
Dividend Yield *
- -------------------------------------------------------------------------
For 6 months 10.14% 13.42%
- -------------------------------------------------------------------------
For 12 months 9.60 11.83
- -------------------------------------------------------------------------
Weighted Average Maturity (years) 14.6 14.1
- -------------------------------------------------------------------------
Weighted Average Effective
Duration (years) 5.3 5.1
- -------------------------------------------------------------------------
Weighted Average Quality ** BB+ BB+
- -------------------------------------------------------------------------
* Dividends earned and reinvested for the periods indicated are
annualized and divided by the average daily net asset values per share
for the same period.
** Based on T. Rowe Price research.
================================================================================
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Performance Comparison
These charts show the value of a hypothetical $10,000 investment in each
fund over the past 10 fiscal year periods or since inception (for funds lacking
10-year records). The result is compared with a broad-based average or index.
The index return does not reflect expenses, which have been deducted from the
fund's return.
{Global Bond Fund SEC chart shown here]
[International Bond Fund SEC chart shown here]
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Performance Comparison
[Emerging Markets Bond Fund SEC Chart shown here]
Average Annual Compound Total Return
This table shows how each fund would have performed each year if its actual
(or cumulative) returns for the periods shown had been earned at a constant
rate.
Since Inception
Periods Ended 12/31/98 1 Year 5 Years 10 Years Inception Date
- ---------------------- ------ ------- -------- --------- ----
Global Bond Fund 11.93% 6.78% -- 7.43% 12/31/90
International Bond Fund 15.03 7.10 8.64% 9.25 9/10/86
Emerging Markets Bond Fund -23.09 -- -- 11.50 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>
T. Rowe Price Global Bond Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
- --------------------
Year
Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 9.90 $ 10.35 $ 10.26 $ 9.22 $ 10.08
- ----------------------------------------------------------------------------
Investment activities
Net investment income 0.53* 0.54* 0.56* 0.59* 0.54*
Net realized and
unrealized gain (loss) 0.61 (0.39) 0.09 1.04 (0.84)
- ----------------------------------------------------------------------------
Total from
investment activities 1.14 0.15 0.65 1.63 (0.30)
- ----------------------------------------------------------------------------
Distributions
Net investment income (0.53) (0.49) (0.56) (0.59) (0.51)
Net realized gain - (0.11) - - (0.02)
Tax return of capital - - - - (0.03)
- ----------------------------------------------------------------------------
Total distributions (0.53) (0.60) (0.56) (0.59) (0.56)
- ----------------------------------------------------------------------------
NET ASSET VALUE
End of period $ 10.51 $ 9.90 $ 10.35 $ 10.26 $ 9.22
============================================================================
Ratios/Supplemental Data
Total return+ 11.93%* 1.61%* 6.59%* 18.13%* (3.06)%*
- -----------------------------------------------------------------------------
Ratio of expenses to
average net assets 1.00%* 1.20%* 1.20%* 1.20%* 1.20%*
- -----------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 5.29%* 5.38%* 5.48%* 6.08%* 5.57%*
- -----------------------------------------------------------------------------
Portfolio turnover rate 136.2% 153.2% 262.6%++ 290.7% 254.1%
- -----------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 41,926 $ 44,069 $ 55,869 $ 28,207 $ 36,516
- -----------------------------------------------------------------------------
+ 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 1.20% voluntary expense limitation in
effect through 12/31/97 and a 1.00% voluntary expense limitation in
effect through 12/31/98.
++ Excludes the effect of the acquisition of the Short-Term Global Income
Fund's assets.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price International Bond Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
Year
Ended
12/31/98 12/31/97 12/31/96 12/31/95 12/31/94
-------- -------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 9.58 $ 10.46 $ 10.46 $ 9.34 $ 10.34
- --------------------------------------------------------------------------
Investment activities
Net investment income 0.51 0.54 0.60 0.62 0.60
Net realized and
unrealized gain (loss) 0.88 (0.87) 0.11 1.24 (0.79)
- --------------------------------------------------------------------------
Total from
investment activities 1.39 (0.33) 0.71 1.86 (0.19)
- --------------------------------------------------------------------------
Distributions
Net investment income (0.51) (0.46) (0.60) (0.62) (0.60)
Net realized gain - (0.09) (0.11) (0.12) (0.21)
- --------------------------------------------------------------------------
Total distributions (0.51) (0.55) (0.71) (0.74) (0.81)
NET ASSET VALUE
End of period $ 10.46 $ 9.58 $ 10.46 $ 10.46 $ 9.34
Ratios/Supplemental Data
Total return+ 15.03% (3.17)% 7.13% 20.30% (1.84)%
- ---------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.88% 0.86% 0.87% 0.90% 0.98%
- ---------------------------------------------------------------------------
Ratio of net investment
income to average
net assets 5.19% 5.38% 5.86% 6.10% 6.07%
- ---------------------------------------------------------------------------
Portfolio turnover rate 128.9% 155.9% 234.0% 237.1% 345.2%
- ---------------------------------------------------------------------------
Net assets, end of period
(in millions) $ 926 $ 826 $ 969 $ 1,016 $ 738
- ---------------------------------------------------------------------------
+ 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.
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Emerging Markets Bond Fund
- --------------------------------------------------------------------------------
For a share outstanding throughout each period
FINANCIAL HIGHLIGHTS
Year 12/30/94
Ended Through
12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- --------
NET ASSET VALUE
Beginning of period $ 13.71 $ 12.97 $ 10.67 $ 10.00
- ------------------------------------------------------------------------------
Investment activities
Net investment income 1.31* 1.16* 1.00* 1.03*
Net realized and
unrealized gain (loss) (4.29) 0.97+ 2.72 1.38
- ------------------------------------------------------------------------------
Total from investment
activities (2.98) 2.13 3.72 2.41
- ------------------------------------------------------------------------------
Distributions
Net investment income (1.31) (1.15) (1.01) (1.02)
Net realized gain (0.19) (0.24) (0.41) (0.72)
- ----------------------------------------------------------------------------
Total distributions (1.50) (1.39) (1.42) (1.74)
NET ASSET VALUE
End of period $ 9.23 $ 13.71 $ 12.97 $ 10.67
======= ========= ========= =========
Ratios/Supplemental Data
Total return# (23.09)%* 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 11.52%* 8.61%* 8.37%* 10.20%*
- ------------------------------------------------------------------------------
Portfolio turnover rate 78.4% 87.6% 168.7% 273.5%
- ------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $ 148,111 $ 113,419 $ 39,862 $ 9,989
- ------------------------------------------------------------------------------
# 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.
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
T. Rowe Price Global Bond Fund
- --------------------------------------------------------------------------------
December 31, 1998
PORTFOLIO OF INVESTMENTS
- ------------------------
Par/Shares Value
---------- -----
In thousands
AUSTRALIA 0.8%
Government Bonds 0.8%
Federal National Mortgage Association,
6.375%, 8/15/07 AUD 500 $ 324
- -------------------------------------------------------------------------------
Total Australia (Cost $340) 324
CANADA=1.5%====================================================================
Government Bonds 1.5%
Government of Canada, 8.00%, 6/1/23 CAD 370 334
- -------------------------------------------------------------------------------
Province of Alberta, 8.00%, 3/1/00 450 305
- -------------------------------------------------------------------------------
Total Canada (Cost $661) 639
- -------------------------------------------------------------------------------
DENMARK=3.5%===================================================================
Government Bonds 3.5%
Kingdom of Denmark
7.00%, 11/15/07 DKK 5,000 944
- -------------------------------------------------------------------------------
6.00%, 11/15/09 2,800 502
- -------------------------------------------------------------------------------
Total Denmark (Cost $1,409) 1,446
- -------------------------------------------------------------------------------
EUROPEAN=CURRENCY=UNIT=2.6%====================================================
Government Bonds 2.3%
Bonos del Estado, 5.15%, 7/30/09 XEU 500 624
- -------------------------------------------------------------------------------
Bons du Tresor Annuel, 4.50%, 7/12/02 300 366
- -------------------------------------------------------------------------------
990
- -------------------------------------------------------------------------------
Corporate Bonds 0.3%
Orange PLC, 7.625%, 8/1/08 100 118
- -------------------------------------------------------------------------------
118
- -------------------------------------------------------------------------------
Total European Currency Unit (Cost $1,047) 1,108
- -------------------------------------------------------------------------------
<PAGE>
FRANCE=1.6%====================================================================
Government Bonds 0.9%
Caisse Nationale des Autoroutes,
5.85%, 3/24/13 FRF 1,900 390
- -------------------------------------------------------------------------------
390
- -------------------------------------------------------------------------------
Corporate Bonds 0.7%
SunAmerica Institutional Funding,
5.25%, 5/20/09 1,500 279
- -------------------------------------------------------------------------------
279
- -------------------------------------------------------------------------------
Total France (Cost $576) 669
- -------------------------------------------------------------------------------
GERMANY=12.6%==================================================================
Government Bonds 10.5%
Bundesrepublic
7.50%, 11/11/04 DEM 1,000 $ 722
- -------------------------------------------------------------------------------
6.875%, 5/12/05 1,300 919
- -------------------------------------------------------------------------------
6.00%, 1/4/07 2,200 1,508
- -------------------------------------------------------------------------------
6.50%, 7/4/27 1,300 980
- -------------------------------------------------------------------------------
Tennessee Valley Authority, 6.375%, 9/18/06 400 277
- -------------------------------------------------------------------------------
4,406
- -------------------------------------------------------------------------------
Corporate Bonds 2.1%
3M, 5.00%, 10/15/01 500 309
- -------------------------------------------------------------------------------
Colt Telecom, 8.875%, 11/30/07 160 99
- -------------------------------------------------------------------------------
SunAmerica Institutional Funding,
5.125%, 4/15/08 750 470
- -------------------------------------------------------------------------------
878
- -------------------------------------------------------------------------------
Total Germany (Cost $4,985) 5,284
- -------------------------------------------------------------------------------
GREECE=3.3%====================================================================
Government Bonds 3.3%
Hellenic Republic, 8.60%, 3/26/08 GRD 350,000 1,392
- -------------------------------------------------------------------------------
Total Greece (Cost $1,297) 1,392
- -------------------------------------------------------------------------------
<PAGE>
ITALY=6.0%=====================================================================
Government Bonds 6.0%
Buoni del Tesoro Poliennali
8.25%, 7/1/01 ITL 1,100,000 745
- -------------------------------------------------------------------------------
9.00%, 10/1/03 520,000 389
- -------------------------------------------------------------------------------
8.75%, 7/1/06 600,000 474
- -------------------------------------------------------------------------------
7.25%, 11/1/26 1,110,000 909
- -------------------------------------------------------------------------------
Total Italy (Cost $2,267) 2,517
- -------------------------------------------------------------------------------
JAPAN=1.2%=====================================================================
Government Bonds 1.2%
Asian Development Bank, 3.125%, 6/29/05 JPY 25,000 239
- -------------------------------------------------------------------------------
Central Bank of Tunisia, 4.95%, 9/27/11 20,000 147
- -------------------------------------------------------------------------------
European Investment Bank, 3.00%, 9/20/06 10,000 95
- -------------------------------------------------------------------------------
Total Japan (Cost $477) 481
- -------------------------------------------------------------------------------
NETHERLANDS=2.2%===============================================================
Government Bonds 2.2%
Government of Netherlands, 5.75%, 1/15/04 NLG 1,600 $ 936
- -------------------------------------------------------------------------------
Total Netherlands (Cost $927) 936
- -------------------------------------------------------------------------------
NORWAY=0.5%====================================================================
Government Bonds 0.5%
Kingdom of Norway, 5.50%, 5/15/09 NOK 1,500 200
- -------------------------------------------------------------------------------
Total Norway (Cost $203) 200
- -------------------------------------------------------------------------------
POLAND=0.7%====================================================================
Government Bonds 0.7%
Republic of Poland, 12.00%, 10/12/03 PLN 1,000 298
- -------------------------------------------------------------------------------
Total Poland (Cost $261) 298
- -------------------------------------------------------------------------------
<PAGE>
PORTUGAL=0.9%==================================================================
Government Bonds 0.9%
European Investment Bank, 5.25%, 3/23/02 PTE 65,000 396
- -------------------------------------------------------------------------------
Total Portugal (Cost $354) 396
- -------------------------------------------------------------------------------
RUSSIA=0.0%====================================================================
Government Bonds 0.0%
Government of Russia Treasury Bill
Zero Coupon, 11/18/98 * RUB 875 5
- -------------------------------------------------------------------------------
Zero Coupon, 3/24/99 * 1,046 5
- -------------------------------------------------------------------------------
Total Russia (Cost $274) 10
- -------------------------------------------------------------------------------
SOUTH=AFRICA=1.0%==============================================================
Government Bonds 1.0%
Republic of South Africa, 12.00%, 2/28/05 ZAR 3,000 433
- -------------------------------------------------------------------------------
Total South Africa (Cost $430) 433
- -------------------------------------------------------------------------------
SPAIN=3.1%=====================================================================
Government Bonds 3.1%
Bonos del Estado
6.15%, 1/31/13 ESP 130,000 $ 1,087
- -------------------------------------------------------------------------------
6.00%, 1/31/29 25,000 208
- -------------------------------------------------------------------------------
Total Spain (Cost $1,244) 1,295
- -------------------------------------------------------------------------------
SWEDEN=0.9%====================================================================
Government Bonds 0.9%
Kingdom of Sweden, 5.50%, 4/12/02 SEK 3,000 390
- -------------------------------------------------------------------------------
Total Sweden (Cost $392) 390
- -------------------------------------------------------------------------------
<PAGE>
UNITED=KINGDOM=7.1%============================================================
Government Bonds 2.9%
United Kingdom Treasury
7.50%, 12/7/06 GBP 400 799
- -------------------------------------------------------------------------------
7.25%, 12/7/07 200 402
- -------------------------------------------------------------------------------
1,201
- -------------------------------------------------------------------------------
Corporate Bonds 4.2%
Abbey National, 8.00%, 4/2/03 175 318
- -------------------------------------------------------------------------------
Annington Finance, 7.75%, 10/2/11 360 734
- -------------------------------------------------------------------------------
National Power, 8.375%, 8/2/06 300 566
- -------------------------------------------------------------------------------
Swiss Bank, 8.75%, 12/18/25 60 140
- -------------------------------------------------------------------------------
1,758
- -------------------------------------------------------------------------------
Total United Kingdom (Cost $2,674) 2,959
- -------------------------------------------------------------------------------
UNITED=STATES=47.8%============================================================
Government Bonds 38.3%
Caisse d'Amortissement de la Dette Sociale
6.50%, 3/11/02 USD 500 518
- -------------------------------------------------------------------------------
Central Bank of Nigeria
Par (Series WW), STEP,
6.25%, 11/15/20 250 160
- -------------------------------------------------------------------------------
City of Moscow, 9.50%, 5/31/00 50 18
- -------------------------------------------------------------------------------
Federal National Mortgage Association,
5.25%, 1/15/03 630 637
- -------------------------------------------------------------------------------
Instituto de Credito Oficial, 6.00%, 5/19/08 400 417
- -------------------------------------------------------------------------------
Japan Highway Public, 6.75%, 9/17/07 400 428
- -------------------------------------------------------------------------------
National Republic of Bulgaria, FLIRB, STEP
2.50%, 7/28/12 USD 660 $ 380
- -------------------------------------------------------------------------------
Republic of Argentina
FRB, 6.188%, 3/31/05 165 140
- -------------------------------------------------------------------------------
Par, FRN, 5.75%, 3/31/23 275 199
- -------------------------------------------------------------------------------
Republic of Colombia, 8.625%, 4/1/08 100 86
- -------------------------------------------------------------------------------
<PAGE>
Republic of Ivory Coast, FLIRB, STEP,
2.00%, 3/31/18 400 100
- -------------------------------------------------------------------------------
Republic of Poland, PDI, STEP,
5.00%, 10/27/14 100 94
- -------------------------------------------------------------------------------
U.S. Treasury Bonds
7.125%, 2/15/23 810 998
- -------------------------------------------------------------------------------
6.375%, 8/15/27 2,350 2,702
- -------------------------------------------------------------------------------
U.S. Treasury Notes
6.00%, 8/15/00 3,300 3,370
- -------------------------------------------------------------------------------
5.375%, 2/15/01 500 508
- -------------------------------------------------------------------------------
5.75%, 8/15/03 2,860 2,987
- -------------------------------------------------------------------------------
6.50%, 8/15/05 400 440
- -------------------------------------------------------------------------------
6.125%, 8/15/07 1,570 1,714
- -------------------------------------------------------------------------------
United Mexican States, 9.875%, 1/15/07 90 89
- -------------------------------------------------------------------------------
Vnesheconombank
IAN, FRN, 5.969%, 12/15/15 335 37
- -------------------------------------------------------------------------------
Principal Loans, FRN, 5.969%, 12/15/20 750 48
- -------------------------------------------------------------------------------
16,070
- -------------------------------------------------------------------------------
Corporate Bonds 8.2%
Aramark Services, 6.75%, 8/1/04 250 252
- -------------------------------------------------------------------------------
Capital One Financial, 7.125%, 8/1/08 150 143
- -------------------------------------------------------------------------------
Consumers Energy, (144a), 6.375%, 2/1/08 500 511
- -------------------------------------------------------------------------------
Deutsche Ausgleichsbank, 5.125%, 9/22/03 300 300
- -------------------------------------------------------------------------------
Newell, 6.35%, 7/15/08 500 523
- -------------------------------------------------------------------------------
Norfolk Southern, 7.35%, 5/15/07 500 550
- -------------------------------------------------------------------------------
Poland Communications Sr. Notes, (144a)
9.875%, 11/1/03 180 157
- -------------------------------------------------------------------------------
R&B Falcon, 6.75%, 4/15/05 500 456
- -------------------------------------------------------------------------------
Union Texas Petroleum, 7.00%, 4/15/08 500 541
- -------------------------------------------------------------------------------
3,433
- -------------------------------------------------------------------------------
Money Market Funds 1.3%
Reserve Investment Fund, 5.42% # 533 533
- -------------------------------------------------------------------------------
533
- -------------------------------------------------------------------------------
Total United States (Cost $20,228) 20,036
- -------------------------------------------------------------------------------
<PAGE>
=Total=Investments=in=Securities===============================================
97.3% of Net Assets (Cost $40,046) $ 40,813
=Forward=Currency=Exchange=Contracts
In thousands
Counter- Unrealized
party Settlement Receive Deliver Gain (Loss)
----------------- ---------- ------------- ------------ ----------
Chase Manhattan 1/11/99 DEM 5,691 USD 3,451 $ (35)
Chase Manhattan 1/11/99 USD 176 SEK 1,431 (1)
Citibank 1/15/99 USD 205 ZAR 1,233 (3)
Chase Manhattan 1/15/99 USD 225 ZAR 1,376 (7)
Chase Manhattan 1/21/99 DEM 1,004 GBP 361 4
Chase Manhattan 1/29/99 JPY 517,260 USD 4,267 326
Chase Manhattan 2/11/99 DEM 825 GBP 300 (1)
Net unrealized gain (loss) on open forward
currency exchange contracts 283
Other Assets Less Liabilities 830
NET ASSETS $ 41,926
- --------------------------------------------------------------------------------
* Non-income producing
+ 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 pesta
FRF French franc
GBP British sterling
GRD Greek drachma
ITL Italian lira
JPY Japanese yen
NLG Dutch guilder
NOK Norwegian krone
PLN Polish zloty
PTE Portuguese escudo
RUB Russian ruble
SEK Swedish krona
USD U.S. dollar
XEU European currency unit
ZAR South African rand
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
IAN Interest arrears note
PDI Past due interest bond
STEP Stepped coupon note for which 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
- --------------------------------------------------------------------------------
December 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
In thousands
Assets
Investments in securities, at value (cost $40,046) $ 40,813
Other assets 2,295
- -------------------------------------------------------------------------
Total assets 43,108
==Liabilities============================================================
Total liabilities 1,182
NET ASSETS $ 41,926
=========================================================================
Net Assets Consist of:
Accumulated net realized gain/loss - net of distributions $ 582
Net unrealized gain (loss) 1,040
Paid-in-capital applicable to 3,987,996 shares of $0.01 par
value capital stock outstanding; 2,000,000,000 shares
of the corporation authorized 40,304
NET ASSETS $ 41,926
NET ASSET VALUE PER SHARE $ 10.51
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price International Bond Fund
- --------------------------------------------------------------------------------
December 31, 1998
PORTFOLIO OF INVESTMENTS
Par/Shares Value
---------- -----
In thousands
AUSTRALIA 0.8%
Government Bonds 0.8%
Federal National Mortgage Association
6.375%, 8/15/07 AUD 12,000 $ 7,773
- --------------------------------------------------------------------------------
Total Australia (Cost $8,150) 7,773
- --------------------------------------------------------------------------------
=AUSTRIA=2.2%===================================================================
Government Bonds 2.2%
Republic of Austria, 5.00%, 1/15/08 ATS 221,000 20,211
- --------------------------------------------------------------------------------
Total Austria (Cost $19,686) 20,211
- --------------------------------------------------------------------------------
=CANADA=4.3%====================================================================
Government Bonds 4.3%
Government of Canada
7.00%, 12/1/06 CAD 9,000 6,700
- --------------------------------------------------------------------------------
6.00%, 6/1/08 17,000 12,042
- --------------------------------------------------------------------------------
8.00%, 6/1/23 18,800 16,986
- --------------------------------------------------------------------------------
Province of Ontario, 8.25%, 12/1/05 5,000 3,868
- --------------------------------------------------------------------------------
Total Canada (Cost $38,219) 39,596
- --------------------------------------------------------------------------------
=DENMARK=4.5%===================================================================
Government Bonds 4.5%
Kingdom of Denmark
7.00%, 11/15/07 DKK 167,000 31,537
- --------------------------------------------------------------------------------
6.00%, 11/15/09 59,000 10,584
- --------------------------------------------------------------------------------
Total Denmark (Cost $41,113) 42,121
- --------------------------------------------------------------------------------
<PAGE>
=EUROPEAN=CURRENCY=UNIT=7.4%====================================================
Government Bonds 7.2%
Bonos del Estado, 5.15%, 7/30/09 XEU 17,200 21,472
- --------------------------------------------------------------------------------
Bons du Tresor Annuel, 4.50%, 7/12/02 26,877 32,765
- --------------------------------------------------------------------------------
Republic of Finland, 5.00%, 4/25/09 9,800 12,361
- --------------------------------------------------------------------------------
66,598
- --------------------------------------------------------------------------------
Corporate Bonds 0.2%
Orange PLC, 7.625%, 8/1/08 2,000 2,358
- --------------------------------------------------------------------------------
2,358
- --------------------------------------------------------------------------------
Total European Currency Unit (Cost $64,266) 68,956
- --------------------------------------------------------------------------------
=FRANCE=1.5%====================================================================
Government Bonds 0.9%
Caisse Nationale des Autoroutes, 5.85%, 3/24/13 FRF 39,800 $ 8,163
- --------------------------------------------------------------------------------
8,163
- --------------------------------------------------------------------------------
Corporate Bonds 0.6%
SunAmerica Institutional Funding, 5.25%, 5/20/09 32,600 6,067
- --------------------------------------------------------------------------------
6,067
- --------------------------------------------------------------------------------
Total France (Cost $12,266) 14,230
- --------------------------------------------------------------------------------
=GERMANY=22.1%==================================================================
Government Bonds 16.8%
Bundesrepublic
7.50%, 11/11/04 DEM 14,000 10,106
- --------------------------------------------------------------------------------
6.875%, 5/12/05 36,900 26,088
- --------------------------------------------------------------------------------
6.00%, 1/4/07 94,900 65,060
- --------------------------------------------------------------------------------
6.50%, 7/4/27 33,800 25,467
- --------------------------------------------------------------------------------
Inter-American Development Bank, 7.00%, 6/8/05 25,000 17,614
- --------------------------------------------------------------------------------
Tennessee Valley Authority, 6.375%, 9/18/06 17,000 11,761
- --------------------------------------------------------------------------------
156,096
- --------------------------------------------------------------------------------
<PAGE>
Corporate Bonds 5.3%
3M, 5.00%, 10/15/01 8,350 5,165
- --------------------------------------------------------------------------------
Bank Nederlandse Gemeenten
6.25%, 8/10/00 6,000 3,763
- --------------------------------------------------------------------------------
5.25%, 10/1/01 14,300 9,002
- --------------------------------------------------------------------------------
Colt Telecom, 8.875%, 11/30/07 2,890 1,786
- --------------------------------------------------------------------------------
KFW International Finance, 6.75%, 6/20/05 28,000 19,505
- --------------------------------------------------------------------------------
SunAmerica Institutional Funding, 5.125%, 4/15/08 15,800 9,900
- --------------------------------------------------------------------------------
49,121
- --------------------------------------------------------------------------------
Total Germany (Cost $194,598) 205,217
- --------------------------------------------------------------------------------
=GREECE=4.3%====================================================================
Government Bonds 4.3%
Hellenic Republic
8.60%, 3/26/08 GRD 7,400,000 29,427
- --------------------------------------------------------------------------------
7.50%, 5/20/13 2,813,000 10,634
- --------------------------------------------------------------------------------
Total Greece (Cost $37,417) 40,061
- --------------------------------------------------------------------------------
=ITALY=10.1%====================================================================
Government Bonds 10.1%
Buoni del Tesoro Poliennali
8.25%, 7/1/01 ITL 15,000,000 $ 10,167
- --------------------------------------------------------------------------------
9.00%, 10/1/03 52,130,000 38,957
- --------------------------------------------------------------------------------
8.75%, 7/1/06 31,000,000 24,476
- --------------------------------------------------------------------------------
7.25%, 11/1/26 23,875,000 19,549
- --------------------------------------------------------------------------------
Total Italy (Cost $86,401) 93,149
- --------------------------------------------------------------------------------
=JAPAN=7.9%=====================================================================
Government Bonds 7.6%
Asian Development Bank, 3.125%, 6/29/05 JPY 1,215,000 11,615
- --------------------------------------------------------------------------------
Central Bank of Tunisia, 4.95%, 9/27/11 400,000 2,937
- --------------------------------------------------------------------------------
<PAGE>
European Investment Bank, 3.00%, 9/20/06 250,000 2,391
- --------------------------------------------------------------------------------
Export Import Bank, 4.375%, 10/1/03 2,500,000 25,116
- --------------------------------------------------------------------------------
International Bank for Reconstruction and Development
4.75%, 12/20/04 2,100,000 22,026
- --------------------------------------------------------------------------------
Republic of Austria, 4.50%, 9/28/05 600,000 6,243
- --------------------------------------------------------------------------------
70,328
- --------------------------------------------------------------------------------
Corporate Bonds 0.3%
Korea Industrial Leasing, 2.20%, 8/7/02 330,000 2,511
- --------------------------------------------------------------------------------
2,511
- --------------------------------------------------------------------------------
Total Japan (Cost $71,672) 72,839
- --------------------------------------------------------------------------------
=NETHERLANDS=4.3%===============================================================
Government Bonds 4.3%
Government of Netherlands, 5.75%, 1/15/04 NLG 67,500 39,502
- --------------------------------------------------------------------------------
Total Netherlands (Cost $39,437) 39,502
- --------------------------------------------------------------------------------
=NORWAY=0.9%====================================================================
Government Bonds 0.9%
Kingdom of Norway, 5.50%, 5/15/09 NOK 60,000 7,999
- --------------------------------------------------------------------------------
Total Norway (Cost $8,103) 7,999
- --------------------------------------------------------------------------------
=POLAND=0.5%====================================================================
Government Bonds 0.5%
Republic of Poland, 12.00%, 10/12/03 PLN 16,000 $ 4,768
- --------------------------------------------------------------------------------
Total Poland (Cost $4,172) 4,768
- --------------------------------------------------------------------------------
=PORTUGAL=0.5%==================================================================
Government Bonds 0.5%
European Investment Bank, 5.25%, 3/23/02 PTE 700,000 4,269
- --------------------------------------------------------------------------------
Total Portugal (Cost $3,816) 4,269
- --------------------------------------------------------------------------------
<PAGE>
=RUSSIA=0.0%====================================================================
Government Bonds 0.0%
Government of Russia, Treasury Bill
Zero Coupon, 11/18/98 * RUB 21,250 113
- --------------------------------------------------------------------------------
Zero Coupon, 3/24/99 * 25,106 134
- --------------------------------------------------------------------------------
Total Russia (Cost $6,621) 247
- --------------------------------------------------------------------------------
=SOUTH=AFRICA=1.5%==============================================================
Government Bonds 1.5%
Republic of South Africa, 12.00%, 2/28/05 ZAR 94,000 13,554
- --------------------------------------------------------------------------------
Total South Africa (Cost $13,662) 13,554
- --------------------------------------------------------------------------------
=SPAIN=4.8%=====================================================================
Government Bonds 4.8%
Bonos del Estado
6.15%, 1/31/13 ESP 4,100,000 34,285
- --------------------------------------------------------------------------------
6.00%, 1/31/29 1,250,000 10,374
- --------------------------------------------------------------------------------
Total Spain (Cost $42,948) 44,659
- --------------------------------------------------------------------------------
=SWEDEN=1.8%====================================================================
Government Bonds 1.8%
Kingdom of Sweden, 5.50%, 4/12/02 SEK 125,000 16,253
- --------------------------------------------------------------------------------
Total Sweden (Cost $16,216) 16,253
- --------------------------------------------------------------------------------
=UNITED=KINGDOM=11.2%===========================================================
Government Bonds 6.6%
Federal National Mortgage Association,
6.875%, 6/7/02 GBP 6,400 $ 11,186
- --------------------------------------------------------------------------------
Republic of Austria, 9.00%, 7/22/04 4,000 7,825
- --------------------------------------------------------------------------------
United Kingdom Treasury
7.50%, 12/7/06 15,600 31,143
- --------------------------------------------------------------------------------
7.25%, 12/7/07 5,330 10,718
- --------------------------------------------------------------------------------
60,872
- --------------------------------------------------------------------------------
<PAGE>
Corporate Bonds 4.6%
Alliance & Leicester Building Society,
8.75%, 12/7/06 8,500 16,370
- --------------------------------------------------------------------------------
Annington Finance, 7.75%, 10/2/11 2,500 5,094
- --------------------------------------------------------------------------------
Halifax Building Society, 8.75%, 7/10/06 4,000 7,761
- --------------------------------------------------------------------------------
National Power, 8.375%, 8/2/06 5,000 9,428
- --------------------------------------------------------------------------------
Swiss Bank, 8.75%, 12/18/25 1,620 3,790
- --------------------------------------------------------------------------------
42,443
- --------------------------------------------------------------------------------
Total United Kingdom (Cost $93,327) 103,315
- --------------------------------------------------------------------------------
=UNITED=STATES=6.7%=============================================================
Government Bonds 2.7%
Central Bank of Nigeria
Par (Series WW), STEP, 6.25%, 11/15/20 USD 2,750 1,760
- --------------------------------------------------------------------------------
City of Moscow, 9.50%, 5/31/00 650 237
- --------------------------------------------------------------------------------
National Republic of Bulgaria
FLIRB, STEP, 2.50%, 7/28/12 6,630 3,812
- --------------------------------------------------------------------------------
IAB, FRN, 6.688%, 7/28/11 3,000 2,029
- --------------------------------------------------------------------------------
Republic of Argentina
11.375%, 1/30/17 1,500 1,504
- --------------------------------------------------------------------------------
FRB, 6.188%, 3/31/05 3,901 3,335
- --------------------------------------------------------------------------------
Par, FRN, 5.75%, 3/31/23 3,250 2,348
- --------------------------------------------------------------------------------
Republic of Colombia, 8.625%, 4/1/08 2,400 2,052
- --------------------------------------------------------------------------------
Republic of Ivory Coast
FLIRB, STEP, 2.00%, 3/31/18 4,857 1,214
- --------------------------------------------------------------------------------
PDI, STEP, 2.00%, 3/30/18 952 267
- --------------------------------------------------------------------------------
Republic of Poland, PDI, STEP, 5.00%, 10/27/14 3,575 3,350
- --------------------------------------------------------------------------------
Russian Federation, 11.00%, 7/24/18 550 135
- --------------------------------------------------------------------------------
United Mexican States
Par (Series A), 6.25%, 12/31/19 USD 750 $ 585
- --------------------------------------------------------------------------------
Par (Series W-A), 6.25%, 12/31/19 (With
attached value recovery rights) 950 742
- --------------------------------------------------------------------------------
<PAGE>
Vnesheconombank
IAN, FRN, 5.969%, 12/15/15 8,720 965
- --------------------------------------------------------------------------------
Principal Loans, FRN, 5.969%, 12/15/20 10,700 689
- --------------------------------------------------------------------------------
25,024
- --------------------------------------------------------------------------------
Corporate Bonds 0.3%
Poland Communications, (144a), 9.875%, 11/1/03 3,930 3,419
- --------------------------------------------------------------------------------
3,419
- --------------------------------------------------------------------------------
Money Market Funds 3.7%
Reserve Investment Fund, 5.42% # 34,046 34,046
- --------------------------------------------------------------------------------
34,046
- --------------------------------------------------------------------------------
Total United States (Cost $75,539) 62,489
================================================================================
97.3% of Net Assets (Cost $877,629) $ 901,208
=Forward=Currency=Exchange=Contracts============================================
In thousands
Counter- Unrealized
party Settlement Receive Deliver Gain (Loss)
----------------- ---------- ----------------------------------
Chase Manhattan 1/21/99 DEM 43,794 GBP 15,736 $ 178
Citibank 1/29/99 GBP 7,212 DEM 20,000 (47)
Morgan Stanley 1/29/99 JPY 1,459,922 CAD 18,364 949
Chase Manhattan 1/29/99 JPY 2,056,033 GBP 10,270 1,211
Chase Manhattan 1/29/99 JPY 6,277,727 USD 51,787 3,958
J.P. Morgan 1/29/99 JPY 966,000 ZAR 50,000 172
Morgan Stanley 1/29/99 JPY 585,838 ZAR 31,000 (9)
Chase Manhattan 1/29/99 USD 4,500 JPY 535,196 (252)
Morgan Stanley 1/29/99 USD 5,000 JPY 580,030 (151)
================================================================================
Net unrealized gain (loss) on open forward
currency exchange contracts 6,009
================================================================================
Other Assets Less Liabilities 19,254
================================================================================
NET ASSETS $ 926,471
================================================================================
<PAGE>
* Non-income producing
+ 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
0.3% of net assets.
ATS Austrian schilling
AUD Australian dollar
CAD Canadian dollar
DEM German deutschemark
DKK Danish krone
ESP Spanish peseta
FRF French franc
GBP British sterling
GRD Greek drachma
ITL Italian lira
JPY Japanese yen
NLG Dutch guilder
NOK Norwegian krone
PLN Polish zloty
PTE Portuguese escudo
RUB Russian ruble
SEK Swedish krona
USD U.S. dollar
XEU European currency unit
ZAR South African rand
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
IAB Interest arrears bond
IAN Interest arrears note
PDI Past due interest bond
STEP Stepped coupon note for which the interest rate will adjust on
specified future dates
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price International Bond Fund
- --------------------------------------------------------------------------------
December 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
In thousands
Assets
Investments in securities, at value (cost $877,629)$ 901,208
Securities lending collateral pool 122,332
Other assets 32,191
- -----------------------------------------------------------------------
Total assets 1,055,731
- -----------------------------------------------------------------------
<PAGE>
==Liabilities==========================================================
Obligation to return securities lending collateral 122,332
Other liabilities 6,928
- -----------------------------------------------------------------------
Total liabilities 129,260
NET ASSETS $ 926,471
=======================================================================
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions 4,189
Net unrealized gain (loss) 29,519
Paid-in-capital applicable to 88,540,732 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the corporation authorized 892,763
NET ASSETS $ 926,471
NET ASSET VALUE PER SHARE $ 10.46
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price Emerging Markets Bond Fund
- --------------------------------------------------------------------------------
December 31, 1998
PORTFOLIO OF INVESTMENTS
Par/Shares Value
---------- -----
In thousands
ARGENTINA 17.8%
Government Bonds 16.9%
Republic of Argentina
BOCON PRE 2, FRN, 5.01%, 4/1/01 USD 3,000 $ 2,095
- -------------------------------------------------------------------------------
BOCON PRE 4, FRN, 5.01%, 9/1/02 2,000 2,175
- -------------------------------------------------------------------------------
FRB, 6.188%, 3/31/05 15,698 13,422
- -------------------------------------------------------------------------------
Par, FRN, 5.75%, 3/31/23 10,100 7,297
- -------------------------------------------------------------------------------
24,989
- -------------------------------------------------------------------------------
Corporate Bonds 0.9%
CEI Citicorp, 11.25%, 2/14/07 ARS 1,000 660
- -------------------------------------------------------------------------------
CIA International Telecommunications,
10.375%, 8/1/04 1,000 706
- -------------------------------------------------------------------------------
1,366
- -------------------------------------------------------------------------------
Total Argentina (Cost $25,841) 26,355
- -------------------------------------------------------------------------------
<PAGE>
BRAZIL=12.3%===================================================================
Government Bonds 12.3%
Federative Republic of Brazil
10.125%, 5/15/27 USD 2,495 1,684
- -------------------------------------------------------------------------------
(Class C), 8.00%, 4/15/14 11,246 6,762
- -------------------------------------------------------------------------------
Discount, FRN, 6.125%, 4/15/24 4,000 2,390
- -------------------------------------------------------------------------------
EI, FRN, 6.125%, 4/15/06 5,376 3,481
- -------------------------------------------------------------------------------
NMB, FRN, 6.188%, 4/15/09 1,600 885
- -------------------------------------------------------------------------------
Par, FRN, 5.50%, 4/15/24 5,100 3,060
- -------------------------------------------------------------------------------
Total Brazil (Cost $22,467) 18,262
- -------------------------------------------------------------------------------
BULGARIA=8.2%==================================================================
Government Bonds 8.2%
National Republic of Bulgaria
Discount (Series A), FRN, 6.688%, 7/28/24 500 357
- -------------------------------------------------------------------------------
FLIRB, STEP, 2.50%, 7/28/12 10,020 5,761
- -------------------------------------------------------------------------------
IAB, FRN, 6.688%, 7/28/11 8,900 6,019
- -------------------------------------------------------------------------------
Total Bulgaria (Cost $12,834) 12,137
- -------------------------------------------------------------------------------
COLOMBIA=3.4%==================================================================
Government Bonds 3.4%
Republic of Colombia, 8.625%, 4/1/08 5,825 4,980
- -------------------------------------------------------------------------------
Total Colombia (Cost $4,690) 4,980
- -------------------------------------------------------------------------------
GABON=2.2%=====================================================================
Government Bonds 2.2%
Republic of Gabon, Loan Participation
FRN, 6.188%, 1/4/04 USD 6,022 $ 3,252
- -------------------------------------------------------------------------------
Total Gabon (Cost $4,464) 3,252
- -------------------------------------------------------------------------------
<PAGE>
GREECE=1.9%====================================================================
Government Bonds 1.9%
Hellenic Republic, 8.60%, 3/26/08 GRD 700,000 2,784
- -------------------------------------------------------------------------------
Total Greece (Cost $2,748) 2,784
- -------------------------------------------------------------------------------
INDONESIA=0.9%=================================================================
Corporate Bonds 0.5%
Indah Kiat, 11.875%, 6/15/02 USD 1,000 710
- -------------------------------------------------------------------------------
710
- -------------------------------------------------------------------------------
Convertible Bonds 0.4%
APP Finance (VII) Mauritius (144a),
3.50%, 4/30/03 1,000 565
- -------------------------------------------------------------------------------
565
- -------------------------------------------------------------------------------
Total Indonesia (Cost $1,645) 1,275
- -------------------------------------------------------------------------------
IVORY=COAST=3.8%===============================================================
Government Bonds 3.8%
Republic of Ivory Coast
FLIRB, STEP
2.00%, 3/31/18 8,694 2,173
- -------------------------------------------------------------------------------
2.00%, 3/31/18 FRF 18,595 715
- -------------------------------------------------------------------------------
PDI, STEP
1.90%, 3/30/18 46,773 2,133
- -------------------------------------------------------------------------------
2.00%, 3/30/18 USD 2,337 655
- -------------------------------------------------------------------------------
Total Ivory Coast (Cost $7,052) 5,676
- -------------------------------------------------------------------------------
JAMAICA=1.1%===================================================================
Government Bonds 1.1%
Government of Jamaica, 10.875%, 6/10/05 2,000 1,700
- -------------------------------------------------------------------------------
Total Jamaica (Cost $2,000) 1,700
- -------------------------------------------------------------------------------
<PAGE>
KAZAKHSTAN=0.1%================================================================
Government Bonds 0.1%
Republic of Kazakhstan, 8.375%, 10/2/02 USD 250 $ 201
- -------------------------------------------------------------------------------
Total Kazakhstan (Cost $250) 201
- -------------------------------------------------------------------------------
MEXICO=4.7%====================================================================
Government Bonds 4.7%
United Mexican States, 11.50%, 5/15/26 6,600 7,029
- -------------------------------------------------------------------------------
Total Mexico (Cost $6,733) 7,029
- -------------------------------------------------------------------------------
MOROCCO=4.3%===================================================================
Government Bonds 4.3%
Kingdom of Morocco Restructured Loan
(Tranche A)
FRN, 6.063%, 1/1/09 8,000 6,400
- -------------------------------------------------------------------------------
Total Morocco (Cost $6,561) 6,400
- -------------------------------------------------------------------------------
NIGERIA=8.7%===================================================================
Government Bonds 8.7%
Central Bank of Nigeria
Par (Series WW), STEP, 6.25%, 11/15/20 12,500 8,000
- -------------------------------------------------------------------------------
Promissory Notes, 5.092%, 1/5/10 11,300 4,864
- -------------------------------------------------------------------------------
Total Nigeria (Cost $13,403) 12,864
- -------------------------------------------------------------------------------
PANAMA=4.7%====================================================================
Government Bonds 4.7%
Republic of Panama
8.875%, 9/30/27 1,000 945
- -------------------------------------------------------------------------------
FRN, 6.191%, 5/10/02 1,346 1,262
- -------------------------------------------------------------------------------
IRB, STEP, 4.00%, 7/17/14 6,250 4,719
- -------------------------------------------------------------------------------
Total Panama (Cost $7,000) 6,926
- -------------------------------------------------------------------------------
<PAGE>
PERU=5.1%======================================================================
Government Bonds 5.1%
Republic of Peru IRB (US Series), STEP,
3.25%, 3/7/17 13,145 7,509
- -------------------------------------------------------------------------------
Total Peru (Cost $6,512) 7,509
- -------------------------------------------------------------------------------
PHILIPPINES=1.5%===============================================================
Government Bonds 1.5%
Republic of Philippines
FLIRB (Series B), STEP, 5.962%, 6/1/08 USD 500 $ 415
- -------------------------------------------------------------------------------
Par (Series B), 6.50%, 12/1/17 2,000 1,780
- -------------------------------------------------------------------------------
Total Philippines (Cost $2,215) 2,195
- -------------------------------------------------------------------------------
POLAND=5.3%====================================================================
Government Bonds 4.4%
Republic of Poland
12.00%, 10/12/03 PLN 3,000 894
- -------------------------------------------------------------------------------
Par, STEP, 3.00%, 10/27/24 USD 5,500 3,699
- -------------------------------------------------------------------------------
PDI, STEP, 5.00%, 10/27/14 2,075 1,944
- -------------------------------------------------------------------------------
6,537
- -------------------------------------------------------------------------------
Corporate Bonds 0.9%
Poland Communications Sr. Notes, (144a),
9.875%, 11/1/03 1,500 1,305
- -------------------------------------------------------------------------------
1,305
- -------------------------------------------------------------------------------
Total Poland (Cost $7,598) 7,842
- -------------------------------------------------------------------------------
RUSSIA=3.5%====================================================================
Government Bonds 3.2%
City of Moscow, 9.50%, 5/31/00 700 255
- -------------------------------------------------------------------------------
Government of Russia Treasury Bill
Zero Coupon, 11/11/98 * RUB 8,197 44
- -------------------------------------------------------------------------------
Zero Coupon, 11/18/98 * 23,800 127
- -------------------------------------------------------------------------------
Zero Coupon, 3/24/99 * 10,671 57
- -------------------------------------------------------------------------------
<PAGE>
Russian Federation
11.75%, 6/10/03 USD 1,000 365
- -------------------------------------------------------------------------------
11.00%, 7/24/18 2,575 631
- -------------------------------------------------------------------------------
12.75%, 6/24/28 500 157
- -------------------------------------------------------------------------------
Vnesheconombank
IAN, FRN, 5.969%, 12/15/15 14,450 1,599
- -------------------------------------------------------------------------------
Principal Loans, FRN, 5.969%, 12/15/20 23,850 1,537
- -------------------------------------------------------------------------------
4,772
- -------------------------------------------------------------------------------
Corporate Bonds 0.0%
Rossiyskiy Kredit Bank, 10.25%, 9/29/00 1,000 60
- -------------------------------------------------------------------------------
60
- -------------------------------------------------------------------------------
Convertible Bonds 0.3%
Lukinter Finance, 3.50%, 5/6/02 USD 1,000 $ 375
- -------------------------------------------------------------------------------
375
- -------------------------------------------------------------------------------
Total Russia (Cost $34,873) 5,207
- -------------------------------------------------------------------------------
SOUTH=AFRICA=1.4%==============================================================
Government Bonds 1.4%
Republic of South Africa, 12.00%, 2/28/05 ZAR 14,000 2,019
- -------------------------------------------------------------------------------
Total South Africa (Cost $2,025) 2,019
- -------------------------------------------------------------------------------
SOUTH=KOREA=2.2%===============================================================
Government Bonds 1.1%
Republic of South Korea, 8.875%, 4/15/08 USD 1,615 1,668
- -------------------------------------------------------------------------------
1,668
- -------------------------------------------------------------------------------
Corporate Bonds 1.1%
Pohang Iron & Steel, 7.125%, 11/1/06 2,000 1,675
- -------------------------------------------------------------------------------
1,675
- -------------------------------------------------------------------------------
Total South Korea (Cost $3,329) 3,343
- -------------------------------------------------------------------------------
<PAGE>
THAILAND=0.1%==================================================================
Common Stocks 0.0%
NSM Steel, Warrants, 2/1/08 * 633 6
- -------------------------------------------------------------------------------
6
- -------------------------------------------------------------------------------
Corporate Bonds 0.1%
NSM Steel, (144a), 12.25%, 2/1/08 1,000 130
- -------------------------------------------------------------------------------
130
- -------------------------------------------------------------------------------
Total Thailand (Cost $948) 136
- -------------------------------------------------------------------------------
TURKEY=1.2%====================================================================
Corporate Bonds 1.2%
Cellco Finance, 15.00%, 8/1/05 2,000 1,720
- -------------------------------------------------------------------------------
Total Turkey (Cost $2,000) 1,720
- -------------------------------------------------------------------------------
VENEZUELA=1.2%=================================================================
Government Bonds 1.2%
Republic of Venezuela
Par (Series W-A), 6.75%, 3/31/20 (With
attached oil warrants) USD 1,700 $ 1,196
- -------------------------------------------------------------------------------
Par (Series W-B), 6.75%, 3/31/20 (With
attached oil warrants) 750 528
- -------------------------------------------------------------------------------
Total Venezuela (Cost $2,112) 1,724
- -------------------------------------------------------------------------------
<PAGE>
UNITED=STATES=2.4%=============================================================
Government Bonds 1.2%
Tennessee Valley Authority, Principal Only,
11/1/08 3,000 1,777
- -------------------------------------------------------------------------------
1,777
- -------------------------------------------------------------------------------
Money Market Funds 1.2%
Reserve Investment Fund, 5.42% # 1,803 1,803
- -------------------------------------------------------------------------------
1,803
- -------------------------------------------------------------------------------
Total United States (Cost $3,556) 3,580
- -------------------------------------------------------------------------------
Total=Investments=in=Securities===============================================
98.0% of Net Assets (Cost $182,856) $ 145,116
=Forward=Currency=Exchange=Contracts===========================================
In thousands
Counter- Unrealized
party Settlement Receive Deliver Gain (Loss)
----------------- ---------- ---------------------------------
Citibank 1/15/99 USD 2,029 ZAR 12,204 $ (32)
Citibank 1/19/99 USD 2,781 FRF 15,394 25
Morgan Stanley 2/24/99 KRW 910,250 USD 500 251
Morgan Stanley 2/24/99 USD 552 KRW 910,250 (199)
===============================================================================
Net unrealized gain (loss) on open forward
currency exchange contracts 45
===============================================================================
Other Assets Less Liabilities 2,950
===============================================================================
NET ASSETS $ 148,111
===============================================================================
+ Listed by country of issuance
* Non-income producing
# Seven-day yield
144a Security was purchased pursuant to Rule 144a under the Securities Act of
1933 and may not be resold subject to that rule except to qualified
institutional buyers --total of such securities at period-end amounts to
0.9% of net assets.
ARS Argentinean peso
FRF French franc
GRD Greek drachma
KRW South Korean won
PLN Polish zloty
RUB Russian ruble
USD U.S. dollar
ZAR South African rand
EI Eligible interest bond
FLIRB Front loaded interest reduction bond
FRB Floating rate bond
FRN Floating rate note
IAB Interest arrears bond
IAN Interest arrears note
IRB Interest reduction bond
NMB New money bond
PDI Past due interest bond
STEP Stepped coupon note for which the interest rate will adjust on
specified future dates
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Emerging Markets Bond Fund
- --------------------------------------------------------------------------------
December 31, 1998
STATEMENT OF ASSETS AND LIABILITIES
In thousands
Assets
Investments in securities, at value (cost $182,856)$ 145,116
Securities lending collateral 18,434
Other assets 3,883
- -------------------------------------------------------------------------
Total assets 167,433
==Liabilities============================================================
Obligation to return securities lending collateral 18,434
Other liabilities 888
- -------------------------------------------------------------------------
Total liabilities 19,322
NET ASSETS $ 148,111
=========================================================================
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ 194
Accumulated net realized gain/loss -
net of distributions (9,529)
Net unrealized gain (loss) (38,187)
Paid-in-capital applicable to 16,054,879 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the corporation authorized 195,633
NET ASSETS $ 148,111
NET ASSET VALUE PER SHARE $ 9.23
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Statement of Operations
In thousands
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
Year
Ended
12/31/98 12/31/98 12/31/98
-------- -------- --------
Investment Income
Interest income $2,632 $51,167 $16,666
Expenses
Custody and accounting 134 387 158
Shareholder servicing 112 1,211 394
Investment management 102 5,663 943
Registration 34 43 69
Legal and audit 15 18 18
Prospectus and shareholder reports 12 84 26
Directors 6 7 6
Miscellaneous 4 6 18
- ------------------------------------------------------------------------------
Total expenses 419 7,419 1,632
- ------------------------------------------------------------------------------
Net investment income 2,213 43,748 15,034
- ------------------------------------------------------------------------------
Realized=and=Unrealized=Gain(Loss)============================================
Net realized gain (loss)
Securities 833 17,271 (10,142)
Foreign currency transactions 427 6,386 217
- ------------------------------------------------------------------------------
Net realized gain (loss) 1,260 23,657 (9,925)
- ------------------------------------------------------------------------------
Change in net unrealized gain or loss
Securities 1,047 46,234 (39,381)
Other assets and liabilities
denominated in foreign currencies 181 5,982 (406)
- ------------------------------------------------------------------------------
Change in net unrealized gain or loss 1,228 52,216 (39,787)
- ------------------------------------------------------------------------------
Net realized and unrealized gain (loss) 2,488 75,873 (49,712)
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
==============================================================================
ASSETS FROM OPERATIONS $ 4,701 $ 119,621 $ (34,678)
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Global Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
In thousands
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
T. Rowe Price International Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
In thousands
Year
Ended
12/31/98 12/31/97
-------- --------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 2,213 $ 2,644
Net realized gain (loss) 1,260 (1,569)
Change in net unrealized gain or loss 1,228 (423)
- -----------------------------------------------------------------------------
Increase (decrease) in net assets from
operations 4,701 652
- -----------------------------------------------------------------------------
Distributions to shareholders
Net investment income (2,213) (2,419)
Net realized gain -- (579)
- -----------------------------------------------------------------------------
Decrease in net assets from distributions (2,213) (2,998)
- -----------------------------------------------------------------------------
Capital share transactions *
Shares sold 6,146 8,703
Distributions reinvested 1,701 2,408
Shares redeemed (12,478) (20,565)
- -----------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions (4,631) (9,454)
Net=Assets===================================================================
Increase (decrease) during period (2,143) (11,800)
Beginning of period 44,069 55,869
End of period $ 41,926 $ 44,069
=============================================================================
* Share information
Shares sold 609 875
Distributions reinvested 169 243
Shares redeemed (1,243) (2,065)
- -----------------------------------------------------------------------------
Increase (decrease) in shares outstanding (465) (947)
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Emerging Markets Bond Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
In thousands
Year
Ended
12/31/98 12/31/97
-------- --------
Increase (Decrease) in Net Assets
Operations
Net investment income $ 43,748 $ 48,110
Net realized gain (loss) 23,657 (45,274)
Change in net unrealized gain or loss 52,216 (32,816)
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from operations 119,621 (29,980)
- -------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (43,748) (41,706)
Net realized gain -- (7,944)
- -------------------------------------------------------------------------------
Decrease in net assets from distributions (43,748) (49,650)
- -------------------------------------------------------------------------------
Capital share transactions *
Shares sold 242,652 299,191
Distributions reinvested 38,637 42,881
Shares redeemed (256,522) (406,065)
- -------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 24,767 (63,993)
- -------------------------------------------------------------------------------
Net=Assets=====================================================================
Increase (decrease) during period 100,640 (143,623)
Beginning of period 825,831 969,454
- -------------------------------------------------------------------------------
===============================================================================
End of period $ 926,471 $ 825,831
===============================================================================
* Share information
Shares sold 24,641 30,500
Distributions reinvested 3,943 4,385
Shares redeemed (26,213) (41,420)
- -------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 2,371 (6,535)
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
December 31, 1998
Year
Ended
12/31/98 12/31/97
-------- --------
Increase=(Decrease)=in=Net=Assets=============================================
Operations
Net investment income $ 15,034 $ 6,532
Net realized gain (loss) (9,925) 3,674
Change in net unrealized gain or loss (39,787) (2,558)
- ------------------------------------------------------------------------------
Increase (decrease) in net assets from operations (34,678) 7,648
- ------------------------------------------------------------------------------
Distributions to shareholders
Net investment income (15,034) (6,379)
Net realized gain (1,606) (1,937)
- ------------------------------------------------------------------------------
Decrease in net assets from distributions (16,640) (8,316)
- ------------------------------------------------------------------------------
Capital share transactions *
Shares sold 130,192 133,428
Distributions reinvested 15,078 7,223
Shares redeemed (59,260) (66,426)
- ------------------------------------------------------------------------------
Increase (decrease) in net assets from capital
share transactions 86,010 74,225
- ------------------------------------------------------------------------------
Net=Assets====================================================================
Increase (decrease) during period 34,692 73,557
Beginning of period 113,419 39,862
- ------------------------------------------------------------------------------
==============================================================================
End of period $ 148,111 $ 113,419
==============================================================================
* Share information
Shares sold 11,727 9,516
Distributions reinvested 1,389 522
Shares redeemed (5,335) (4,837)
- ------------------------------------------------------------------------------
Increase (decrease) in shares outstanding 7,781 5,201
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
================================================================================
<PAGE>
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.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
Valuation Debt securities are generally traded in the over-the-counter
market and are valued at a price deemed best to reflect fair value as quoted by
dealers who make markets in these securities or by an independent pricing
service.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
For purposes of determining each fund's net asset value per share, the U.S.
dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of each
fund, as authorized by the Board of Directors.
Currency Translation Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
Premiums and Discounts Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
Other Income and expenses are recorded on the accrual basis. Investment
transactions are accounted for on the trade date. Realized gains and losses are
reported on the identified cost basis. Distributions to shareholders are
recorded by each fund on the ex-dividend date. Income and capital gain
distributions are determined in accordance with federal income tax regulations
and may differ from those determined in accordance with generally accepted
accounting principles. Unrealized gains and losses on forward currency exchange
contracts are included in Other assets and Liabilities, respectively, and in
Change in net unrealized gain or loss in the accompanying financial statements.
<PAGE>
NOTE 2 - INVESTMENT TRANSACTIONS
Consistent with their investment objectives, the funds engage in the
following practices to manage exposure to certain risks or enhance performance.
The investment objective, policies, program, and risk factors of each fund are
described more fully in each fund's prospectus and Statement of Additional
Information.
Emerging Markets At December 31, 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 December 31, 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 December 31, 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 Each fund lends its securities to approved brokers to
earn additional income and receives cash and U.S. government 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 December 31, 1998, the value of
loaned securities and aggregate collateral in the securities lending collateral
pool were as follows:
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
--------- --------- ---------
Loaned securities $ 885,000 $115,946,000 $ 17,779,000
Collateral 927,000 122,332,000 18,434,000
================================================================================
Other Purchases and sales of portfolio securities, other than short-term
securities, for the year ended December 31, 1998, were as follows:
<PAGE>
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
--------- --------- ---------
U.S. government securities
Purchases $ 17,274,000 $ 38,822,000 $ 732,000
Sales 17,009,000 40,438,000 1,593,000
Other securities
Purchases 37,228,000 999,267,000 176,705,000
Sales 41,172,000 985,802,000 92,671,000
================================================================================
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. As of December 31, 1998, the Emerging Markets Fund had
capital loss carryforwards for federal income tax purposes of $6,491,000, all of
which expires in 2006. The Emerging Markets Fund intends to retain gains
realized in future periods that may be offset by available capital loss
carryforwards.
In order for each fund's capital accounts and distributions to shareholders
to reflect the tax character of certain transactions, the following
reclassifications were made during the year ended December 31, 1998. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
--------- --------- ---------
Undistributed net investment income $ - $ - $ 14,000
Paid-in-capital - - (14,000)
================================================================================
At December 31, 1998, the costs of investments for the Global,
International, and Emerging Markets Funds were substantially the same for
federal income tax purposes as for financial reporting and totaled $40,046,000,
$877,629,000, and $182,856,000, respectively. Net unrealized gain (loss) on
investments was as follows:
<PAGE>
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Emerging
Global International Markets
Bond Fund Bond Fund Bond Fund
--------- --------- ---------
Appreciated investments $ 1,930,000 $ 46,602,000 $ 3,347,000
Depreciated investments (1,163,000) (23,023,000) (41,087,000)
Net unrealized gain (loss) $ 767,000 $ 23,579,000 $ (37,740,000)
================================================================================
NOTE 4 - RELATED PARTY TRANSACTIONS
Each fund is managed by Rowe Price-Fleming International, Inc. (the
manager), which is owned by T. Rowe Price Associates, Inc. (Price Associates),
Robert Fleming Holdings Limited, and Jardine Fleming Holdings Limited under a
joint venture agreement.
The investment management agreement between each fund and the manager
provides for an annual investment management fee, of which $9,000, $516,000, and
$95,000 were payable at December 31, 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 December 31, 1998, and for the year 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 of the Global Fund and Emerging Markets Fund,
which would cause each fund's ratio of expenses to average net assets to exceed:
1.20% through December 31, 1997, and 1.00% thereafter through December 31, 1998,
for the Global Fund, and 1.25% through December 31, 1998, for the Emerging
Markets Fund. Through December 31, 2000, Global and Emerging Markets Funds are
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, $180,000
of management fees were not accrued for the year ended December 31, 1998; an
additional $68,000 of unaccrued management fees from prior years remains subject
to reimbursement through December 31, 2000. Pursuant to the Emerging Markets
Fund's agreement, $64,000 of management fees were not accrued for the year ended
December 31, 1998; an additional $128,000 of unaccrued management fees from
prior years remains subject to reimbursement through December 31, 2000.
<PAGE>
In addition, each fund has entered into agreements with Price Associates
and two wholly owned subsidiaries of Price Associates, pursuant to which each
fund receives certain other services. Price Associates computes the daily share
price and maintains the financial records of each fund. T. Rowe Price Services,
Inc. is each fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the funds. T. Rowe Price Retirement
Plan Services, Inc. provides subaccounting and recordkeeping services for
certain retirement accounts invested in each fund. The Global, International,
and Emerging Markets Funds incurred expenses pursuant to these related party
agreements totaling approximately $195,000, $733,000 and $285,000, respectively,
for the year ended December 31, 1998, of which $19,000, $60,000 and $28,000,
respectively, were payable at period-end.
Additionally, each fund is one of several T. Rowe Price-sponsored mutual
funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum)
may invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum Income Fund held
approximately 28.3% of the outstanding shares of the International Fund and
61.4% of the outstanding shares of the Emerging Markets Fund at December 31,
1998. Spectrum International Fund held approximately 0.3% and 1.8% of the
outstanding shares of the International Fund and Emerging Markets Fund
respectively, at December 31, 1998. For the year then ended, the International
Fund was allocated $455,000 of Spectrum expenses, $77,000 of which was payable
at period-end, and the Emerging Markets Fund was allocated $156,000 of Spectrum
expenses, of which $25,000 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, International, and the Emerging Markets Funds for
the year ended December 31, 1998, totaled $24,000, $874,000 and $259,000
respectively, and are reflected as interest income in the accompanying Statement
of Operations.
================================================================================
T. Rowe Price Foreign Bond Funds
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Report of Independent Accountants
To the Board of Directors of T. Rowe Price International Funds, Inc. and
Shareholders of Global Bond Fund, International Bond Fund, and
Emerging Markets Bond Fund
<PAGE>
In our opinion, the accompanying statements of assets and liabilities,
including the portfolios of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Global Bond Fund,
International Bond Fund, and Emerging Markets Bond Fund (comprising T. Rowe
Price International Funds, Inc., hereafter referred to as the "Funds") at
December 31, 1998, and the results of each of their operations, the changes in
each of their net assets and the financial highlights for each of the fiscal
periods presented, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with custodians and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 21, 1999
================================================================================
T. Rowe Price Foreign Bond Funds
- --------------------------------------------------------------------------------
Tax Information (Unaudited) for the Tax Year Ended 12/31/98
We are providing this information as required by the Internal Revenue Code.
The amounts shown may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
The Emerging Markets Bond Fund's distributions to shareholders included
$1,606,000 from long-term capital gains, subject to the 20% rate gains category.
================================================================================
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 BROKERAGE ACCOUNT
OR OBTAIN INFORMATION, CALL:
1-800-638-5660 toll free
<PAGE>
INTERNET ADDRESS:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Foreign Bond Funds.
INVESTOR CENTERS:
101 East Lombard St.
Baltimore, MD 21202
T. Rowe Price
Financial Center
10090 Red Run Blvd.
Owings Mills, MD 21117
Farragut Square
900 17th Street, N.W.
Washington, D.C. 20006
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
T. Rowe Price Investment Services, Inc., Distributor. C15-050 12/31/98
