<PAGE>
Annual Report
- --------------------------------------------------------------------------------
For yield, price, last transaction, and current balance, 24 hours, 7 days a
week, call:
1-800-638-2587 toll free
625-7676 Baltimore area
For assistance with your existing fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
T. Rowe Price
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for distribution only to shareholders and to others
who have received a copy of the prospectus of the T. Rowe Price Japan Fund.
T. ROWE PRICE
Invest With Confidence(R)
JAF
T. ROWE PRICE
- -------------
JAPAN FUND
October 31, 1994
[ART WORK APPEARS HERE]
<PAGE>
- --------------------------------------------------------------------------------
Fellow Shareholders
- --------------------------------------------------------------------------------
The Japanese equity market closed the Fund's fiscal year on a dull note. As in
1993, the market's strength in the first half faded in the face of concerns
about the strong yen and increased equity supply. The main market (Tokyo Stock
Exchange First Section) was flat, and the Second Section fell over 7%, as small
companies fared rather worse than large. However, we do not believe the balance
of 1994 will resemble '93 when the market declined sharply in the last calendar
quarter. The main difference is that the economy slowed in the second half of
1993, leading to sharp downgrades in corporate earnings estimates. This year,
the economy has continued to improve, and despite the negative effect of the
stronger yen on exports, corporate results should show an improvement for the
first time in five years.
The Fund's return lagged the main market for the quarter, reflecting its
approximately 20% exposure to small-company stocks, but compared favorably for
the 12-month period when small companies made a positive contribution.
- -------------------------------------------------------------
Performance Comparison
- -------------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 10/31/94
3 Months 12 Months
------------------------
<S> <C> <C>
Japan Fund -0.6% 9.3%
TSE First Section Index 0.0 8.7
TSE Second Section Index -7.4 17.4
</TABLE>
MARKET AND PORTFOLIO REVIEW
While not yet strong, the economy is showing signs of steady improvement. Always
an important sector for the economy, auto sales rose 12% for the year ended
August -- the first rise in over three years. Looking more broadly at consumer
expenditures, retail sales rose 1.7% during the same period, as the effects of
the hot summer and the income tax cut offset further retail price deflation.
Encouragingly for the corporate sector, if not so much for the consumer, price
deflation seemed to be slowing in recent months. Given this pickup in final
demand, it is also good to see that capital expenditures by corporate Japan
appear to be bottoming, as highlighted in our last quarterly report. Machine
tool orders rose over 10% for the year ended August. From a depressed base, the
construction sector is also showing signs of recovery after the vast
overbuilding of the bubble period. As a result, we have been raising our
weightings in areas benefiting from capital expenditures.
This expansion of economic activity is likely to continue until 1997,
supported by a healthy world economic environment. However, we believe Japan
will experience subnormal rates of recovery due to the persistent problems of
overcapacity, the high cost of exports due to the strength of the yen and a
risk-averse banking sector. Monetary growth has been restricted to a mere 2%,
and bank lending itself has contracted for the first time since records were
compiled. The banking system is past the danger point, but rebuilding healthy
balance sheets will take until the end of the decade.
Against this backdrop, your Fund continues to emphasise market sectors
that are sensitive to the economic recovery. We are overweighting manufacturing,
in particular electricals and electronic components, together with machinery,
basic materials and housing-related stocks. Conversely, your Fund has a very low
weighting in defensive areas such as pharmaceuticals and public works, while
food companies and utilities are not held at all. We continue to avoid most
financials; we own no banks or insurance companies and have only a limited
exposure to the smaller brokers.
Over the quarter, we added both large and small companies to the
favoured sectors just mentioned. A position was initiated in leading machine
tool company FANUC while, among
<PAGE>
electronic companies, the existing positions in SONY and TDK were increased.
The reorientation toward basic material companies was furthered by the addition
of MITSUBISHI PAPER, TOKYO STEEL MANUFACTURING and leading titanium dioxide
manufacturer, ISHIHARA SANGYO.
At present, 21% of your portfolio is committed to smaller companies,
where our sector focus is much the same as for our large-company holdings. In
particular, we have been increasing exposure to smaller machinery companies.
Many of these sell close to their book values and, with capital expenditures
likely to be on a steady up trend for the next three years, many offer good
value in relation to their likely earnings peak in 1987.
OUTLOOK
As we noted at the opening, the Japanese market has moved sideways since the
early summer. The worst of the supply problem is now behind us, however, and
a steady economic expansion appears to be firmly in place. On the back of
this, corporate earnings are beginning to surprise the market positively. We
believe this will help to push at least the economically sensitive parts of
the market higher as we move into 1995 and feel that your Fund is well
positioned to benefit from such a rise.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
President
November 17, 1994
- ----------------------------------------------------------
Industry Diversification
- ----------------------------------------------------------
October 31, 1994
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Capital Goods 40.9%
- ----------------------------------------------------------
Consumer Goods 26.0
- ----------------------------------------------------------
Basic Industry 20.6
- ----------------------------------------------------------
Transport/Storage 5.5
- ----------------------------------------------------------
Financial 3.1
- ----------------------------------------------------------
Energy 0.8
- ----------------------------------------------------------
Miscellaneous 0.8
- ----------------------------------------------------------
Reserves 2.3
- ----------------------------------------------------------
Total Net Assets 100.0%
- ----------------------------------------------------------
</TABLE>
- ----------------------------------------------------------
Security Classification
- ----------------------------------------------------------
October 31, 1994
<TABLE>
<CAPTION>
Cost Market Value
Percent of Net Assets (000) (000)
- ------------------------------ -------- ------------
<S> <C> <C>
Common Stocks
& Warrants, 97.7% $190,157 $198,642
- ----------------------------------------------------------
Short-Term
Investments, 2.2% 4,388 4,388
- ----------------------------------------------------------
Total Investments, 99.9% 194,545 203,030
- ----------------------------------------------------------
Other Assets Less
Liabilities, 0.1% 267 273
- ----------------------------------------------------------
Total Net Assets, 100.0% $194,812 $203,303
- ----------------------------------------------------------
</TABLE>
2
<PAGE>
- ----------------------------------------------------------
Twenty-Five Largest Holdings
- ----------------------------------------------------------
October 31, 1994
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Komori 2.4%
- ----------------------------------------------------------
TDK 2.3
- ----------------------------------------------------------
Sekisui Chemical 2.3
- ----------------------------------------------------------
Kuraray 2.2
- ----------------------------------------------------------
NEC 2.2
- ----------------------------------------------------------
Mitsubishi Heavy Industries 2.1
- ----------------------------------------------------------
Ryoyo Electric 2.1
- ----------------------------------------------------------
Japan Synthetic Rubber 2.1
- ----------------------------------------------------------
DDI 2.1
- ----------------------------------------------------------
East Japan Railway 2.0
- ----------------------------------------------------------
Sumitomo 2.0
- ----------------------------------------------------------
Murata Manufacturing 2.0
- ----------------------------------------------------------
Canon 2.0
- ----------------------------------------------------------
Mitsui Fudosan 2.0
- ----------------------------------------------------------
Amada 1.9
- ----------------------------------------------------------
Nippon Denso 1.9
- ----------------------------------------------------------
Makita Electric Works 1.9
- ----------------------------------------------------------
Sharp 1.7
- ----------------------------------------------------------
Komatsu 1.7
- ----------------------------------------------------------
Fanuc 1.7
- ----------------------------------------------------------
Nippon Steel 1.6
- ----------------------------------------------------------
Tokyo Electronics 1.6
- ----------------------------------------------------------
Honda Motor Company 1.5
- ----------------------------------------------------------
Sony 1.5
- ----------------------------------------------------------
Sumitomo Electric 1.5
- ----------------------------------------------------------
Total 48.3%
- ----------------------------------------------------------
</TABLE>
- ----------------------------------------------------------
Fiscal-Year Performance
- ----------------------------------------------------------
Periods Ended October 31, 1994
<TABLE>
<CAPTION>
Since Inception
1 Year 12/30/91
-------- ---------------
<S> <C>
9.3% 8.6%*
</TABLE>
*Average Annual Compound Total Return
Income return and principal value represent past performance and will vary.
Shares may be worth more or less at redemption than at original purchase.
[PERFORMANCE COMPARISON CHART APPEARS HERE]
3
<PAGE>
- --------------------------------------------------------------------------------
REVIEWING YOUR INTERNATIONAL INVESTING STRATEGY
- --------------------------------------------------------------------------------
Not so very long ago, we probably would not have addressed this issue, because
relatively few U.S. investors had an international investing strategy to review.
In recent years, however, investor focus has broadened appreciably, and now
global investing seems finally to be catching up with "global consuming."
The merits of placing a portion of your financial assets in overseas
investments have become widely recognized, as evidenced by the dramatic growth
of international mutual fund assets. Amid all the investment uncertainties
generated by rising interest rates this year -- both in the U.S. and a number of
other countries -- our international equity funds continued to expand
impressively.
The historic evidence is clear that a prudent equity diversification
strategy that includes foreign stocks can reduce the year-to-year volatility of
an equity portfolio and, over time, enhance overall returns. Volatility may be
reduced because foreign stocks often move in divergent directions from the U.S.
market. With over half of all stocks in the world originating and trading
outside the U.S. -- many in countries growing faster than the U.S. -- it can be
argued that the investor who restricts his or her portfolio entirely to U.S.
securities is less prudent than the one who diversifies more widely.
Since you are an international investor, we do not want to preach to
the converted. Rather, we want to suggest you take a minute to review your
T. Rowe Price international investments to ensure they are in line with your
financial strategy and your overall portfolio.
AN INTERNATIONAL ALLOCATION
Except in unusual circumstances, we believe a majority of an investor's
international equity exposure should be in a core fund that has a broadly
diversified portfolio of well-established companies around the world. Our
International Stock Fund is designed to be such a core holding. If you have a
particular interest in a certain region, you may want to put some assets in a
more specialized fund. The New Asia, Europe, Latin America, and Japan Funds have
narrow geographic focuses, while our International Discovery Fund emphasizes
rapidly growing smaller companies in all of those areas. Without the conviction
to stick through potentially tough periods, you should be cautious about
investing in regional funds, which may have greater price volatility.
Don't base your allocation decisions solely on the past performance of
any stock market, and keep in mind the risks of foreign investing, including the
possibility of unfavorable currency exchange rates. You may want to consider
shifting a portion of your investment dollars into a particular international
asset over a period of time, instead of all at once. By focusing on your
particular financial objectives, the length of time in which you hope to achieve
them, and your willingness to accept risks rep resented by various investments,
you should be in a good position to structure your international investment
portfolio.
This report has been preceded or is accompanied by a prospectus.
4
<PAGE>
- --------------------------------------------------------------------------------
Statement of Net Assets (Value in thousands)
T. Rowe Price Japan Fund / October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JAPAN -- 97.7%
- --------------------------------------------------------------------------------
Value
-----
COMMON STOCKS & WARRANTS
<C> <S> <C>
1,000 shs. Ado Electronic Industries..................... $ 34
40,000 Advantest..................................... 1,404
157,000 * Alps Electric................................. 2,124
297,000 Amada......................................... 3,925
18,000 Amway Japan................................... 584
63,000 Aoyama Trading................................ 1,938
87,000 Apollo Electronics............................ 2,425
27,800 Asatsu........................................ 1,429
217,000 Canon......................................... 4,033
33,000 Canon Sales Company........................... 1,114
7,000 Chofu Seisakusho.............................. 186
313,000 Citizen Watch Company......................... 2,585
5,000 Cleanup....................................... 88
464 DDI........................................... 4,206
88,000 * Dai Nippon Screen Manufacturing............... 710
114,000 Daifuku....................................... 1,742
64,000 Daiichi Pharmaceutical........................ 971
33,000 Daishinku..................................... 460
135,000 Daiwa House................................... 1,868
831 East Japan Railway............................ 4,144
47,000 Emoto Industries.............................. 704
19,000 Enix.......................................... 722
17,000 Enplas........................................ 569
71,000 Fanuc......................................... 3,446
16,000 Hirose Electric............................... 950
230,000 Hitachi....................................... 2,399
352,000 Hitachi Zosen................................. 2,061
178,000 Honda Motor Company........................... 3,106
47,000 Horiba........................................ 835
17,000 Idec Izumi.................................... 169
34,000 Ishiguro Homa................................. 916
399,000 * Ishihara Sangyo............................... 1,784
29,000 Ito-Yokado.................................... 1,584
70,000 Japan Airport Terminal........................ 911
65,000 Japan Living Service.......................... 779
611,000 Japan Synthetic Rubber........................ 4,208
57,000 Kansai Sekiwa Real Estate..................... 971
36,000 Kato Denki.................................... 985
16,000 Keyence....................................... 1,933
49,000 Kokuyo........................................ 1,260
365,000 Komatsu....................................... 3,467
183,000 Komori........................................ 4,894
203,000 Kumagai Gumi.................................. 1,021
351,000 Kuraray....................................... 4,458
14,000 Kyocera....................................... 1,067
28,000 Kyokuto Kaihatsu.............................. 873
51,000 Lintec........................................ 848
29,200 Mabuchi Motor................................. 2,237
203,000 Makita Electric Works......................... 3,836
159,000 Marui......................................... 2,906
800 Marutomi Group................................ 10
1,000 wts. * Marutomi Group, 4/2/96 (DEM).................. 12
113,000 shs. Matsushita Electric Industries................ 1,878
22,000 Meitec........................................ 454
142,000 Meitetsu Transport............................ 1,180
1,500 wts. * Meitetsu Transport, 4/30/97 (CHF)............. 251
535,000 shs. Mitsubishi Heavy Industries................... 4,358
162,000 Mitsubishi Paper.............................. 1,238
358,000 Mitsui Fudosan................................ 4,029
168,000 Mitsui Petrochemical Industries............... 1,585
100,200 Murata Manufacturing.......................... 4,097
345,000 NEC........................................... 4,417
66,000 Namura Shipbuilding........................... 512
182,000 National House................................ 2,725
33,000 Nichicon...................................... 474
1,400 Nichiei....................................... 90
183,000 * Nippon Columbia............................... 1,455
182,000 Nippon Denso.................................. 3,890
73,000 Nippon Denwa Shisetsu......................... 1,093
265,000 * Nippon Kakoh Seishi........................... 1,341
133,000 Nippon Konpo Unyu Soko........................ 1,317
60,000 Nippon Seiki.................................. 1,177
791,000 Nippon Steel.................................. 3,267
157,000 Nippon Thompson............................... 1,240
46,000 Nissha Printing............................... 983
27,000 Paltac........................................ 519
73,000 Pioneer Electronic............................ 1,907
64,000 Rohm.......................................... 2,822
152,000 Ryoyo Electric................................ 4,253
16,000 Sangetsu...................................... 476
98,000 Sankyo........................................ 2,550
107,000 * Sankyo Seiki Manufacturing.................... 821
46,000 Sega Enterprises.............................. 2,389
449,000 Sekisui Chemical.............................. 4,613
207,000 Sekisui House................................. 2,351
30,000 Senshukai..................................... 883
9,000 Seven-Eleven Japan............................ 738
187,000 Sharp......................................... 3,495
88,000 Shinetsu Chemical............................. 1,872
58,000 Sintokogio.................................... 533
48,400 Sony.......................................... 2,953
400,000 Sumitomo...................................... 4,130
197,000 Sumitomo Electric............................. 2,949
93,000 Sumitomo Forestry............................. 1,565
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price Japan Fund / Statement of Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
JAPAN (cont'd)
- --------------------------------------------------------------------------------
<C> <S> <C>
23,000 shs. Sumitomo Precision............................ $ 179
95,000 TDK........................................... 4,669
130,000 Tamura........................................ 1,056
324,000 Teijin........................................ 1,920
17,000 Tenma......................................... 525
65,000 Tohoku Telecommunications..................... 732
80,000 Tokai Rubber Industries....................... 1,462
96,000 Tokyo Electronics............................. 3,212
40,000 Tokyo Steel Manufacturing..................... 1,004
101,000 Toppan Printing............................... 1,491
150,000 * Toshiba Tungaloy.............................. 836
14,000 Toyo Communication............................ 455
49,000 Wako Securities............................... 486
29,400 Xebio......................................... 1,214
47,000 York Benimaru................................. 1,980
30,450 Yurtec........................................ 660
TOTAL JAPAN 198,642
<CAPTION>
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 2.2%
- --------------------------------------------------------------------------------
COMMERCIAL PAPER
<C> <S> <C>
$ 756,000 Harvard University,
4.75%, 11/1/94.............................. 756
1,650,000 Hershey Foods,
4.85%, 11/21/94............................. 1,642
2,000,000 New South Wales Treasury,
5.00%, 11/10/94............................. 1,990
TOTAL SHORT-TERM INVESTMENTS 4,388
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS IN SECURITIES - 99.9% (COST--$194,545) $203,030
- --------------------------------------------------------------------------------
Other Assets Less Liabilities - 0.1% 273
<CAPTION>
NET ASSETS CONSISTING OF:
<S> <C> <C>
Accumulated realized gains/losses
- net of distributions................. $ 12,586
Net unrealized appreciation of
investments............................ 8,491
Paid-in-capital applicable to
17,459,500 shares of $0.01 par
value capital stock outstanding;
2,000,000,000 shares of the
Corporation authorized................. 182,226
-------
NET ASSETS - 100.0% $203,303
========
NET ASSET VALUE PER SHARE $11.64
======
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing
(CHF) Swiss franc denominated
(DEM) German deutschemark denominated
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
T. Rowe Price Japan Fund / Year Ended October 31, 1994
<TABLE>
<CAPTION>
Amounts in Thousands
-------------------------
<S> <C> <C>
INVESTMENT INCOME
Income
Dividends (net of foreign taxes of $158)............................. $ 896
Interest............................................................. 390
-------
Total income......................................................... $ 1,286
Expenses
Investment management fees........................................... 1,289
Shareholder servicing fees & expenses................................ 658
Custodian and accounting fees & expenses............................. 213
Registration fees & expenses......................................... 72
Prospectus & shareholder reports..................................... 43
Legal & auditing fees................................................ 35
Proxy & annual meeting expenses...................................... 12
Directors' fees & expenses........................................... 10
Miscellaneous expenses............................................... 18
-------
Total expenses....................................................... 2,350
-------
Net investment income.................................................. (1,064)
-------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
Securities........................................................... 14,009
Foreign currency transactions........................................ (316)
-------
Net realized gain ..................................................... 13,693
Change in net unrealized appreciation or depreciation
Securities........................................................... (1,716)
Other assets and liabilities denominated in foreign currencies....... 12
-------
Change in net unrealized appreciation or depreciation.................. (1,704)
-------
Net gain on investments................................................ 11,989
-------
INCREASE IN NET ASSETS FROM OPERATIONS $10,925
=======
=============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
T. Rowe Price Japan Fund
<TABLE>
<CAPTION>
From
December 30,
1991
(Commencement
of Operations) to
Year Ended Ten Months Ended December 31,
October 31, 1994 October 31, 1993* 1992
---------------- ----------------- -----------------
Amounts in Thousands
---------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income.................................... $ (1,064) $ (379) $ (60)
Net realized gain (loss) on investments.................. 13,693 7,189 (1,062)
Change in net unrealized appreciation or
depreciation of investments............................ (1,704) 10,926 (731)
--------- --------- --------
Increase (decrease) in net assets from operations........ 10,925 17,736 (1,853)
--------- --------- --------
Distributions to shareholders
Net realized gain on investments......................... (5,844) -- --
--------- --------- --------
Capital share transactions
Sold 28,189, 9,676, and 7,978 shares..................... 318,131 106,384 70,974
Distributions reinvested of 573, 0 and 0 shares.......... 5,598 -- --
Redeemed 18,831, 7,444 and 2,681 shares.................. (212,670) (82,749) (23,396)
--------- --------- --------
Increase in net assets from capital share transactions... 111,059 23,635 47,578
--------- --------- --------
Net equalization........................................... -- -- 67
--------- --------- --------
Total increase............................................. 116,140 41,371 45,792
NET ASSETS
Beginning of period...................................... 87,163 45,792 --
--------- --------- --------
End of period............................................ $ 203,303 $ 87,163 $ 45,792
========= ========= ========
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Fund's fiscal year-end was changed to October 31.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
T. Rowe Price Japan Fund / October 31, 1994
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
T. Rowe Price International Funds, Inc. (the Corporation) is registered under
the Investment Company Act of 1940. The Japan Fund (the Fund), a diversified,
open-end management investment company, is one of the portfolios established by
the Corporation.
A) Valuation - Equity securities listed or regularly traded on a securities
exchange (including NASDAQ) are valued at the last quoted sales price at the
time the valuations are made. A security which is listed or traded on more than
one exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Other equity securities and those listed
securities that are not traded on a particular day are valued at a price within
the limits of the latest bid and asked prices deemed by the Board of Directors,
or by persons delegated by the Board, best to reflect fair value.
Short-term debt securities are valued at their cost which, when combined
with accrued interest, approximates fair value.
For purposes of determining the Fund's net asset value per share, the
U.S. dollar value of all assets and liabilities initially expressed in foreign
currencies is determined by using the mean of the bid and offer prices of such
currencies against U.S. dollars quoted by a major bank.
Assets and liabilities for which the above valuation procedures are
inappropriate or are deemed not to reflect fair value are stated at fair value
as determined in good faith by or under the supervision of the officers of the
Fund, as authorized by the Board of Directors.
B) Currency translation - Foreign currency amounts are translated into U.S.
dollars at prevailing exchange rates as follows: assets and liabilities at the
rate of exchange at the end of the respective period, purchases and sales of
securities and income and expenses at the rate of exchange prevailing on the
dates of such transactions. The effect of changes in foreign exchange rates on
realized and unrealized security gains or losses is reflected as a component of
such gains or losses.
C) 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 an identified cost basis. Dividend income and distributions to
shareholders are recorded by the Fund on the ex-dividend date. Income and
capital gain distributions are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
Effective January 1, 1993, the Fund discontinued its practice of equalization.
The results of operations and net assets were not affected by this change.
NOTE 2 - INVESTMENT TRANSACTIONS
Purchases and sales of portfolio securities, other than short-term and U.S.
Government securities, aggregated $191,653,000 and $89,844,000, respectively,
for the year ended October 31, 1994.
NOTE 3 - FEDERAL INCOME TAXES
No provision for federal income taxes is required since the Fund intends to
continue to qualify as a regulated investment company and distribute all of its
taxable income.
In order for the Fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $1,064,000 of
undistributed net investment income and $1,056,000 of undistributed net realized
gains were reclassified as a $8,000 decrease to paid-in-capital during the year
ended October 31, 1994. The results of operations and net assets were not
affected by the reclassifications.
At October 31, 1994, the aggregate cost of investments for federal
income tax and financial reporting purposes was $194,545,000 and net unrealized
appreciation aggregated $8,485,000, of which $15,821,000 related to appreciated
investments and $7,336,000 to depreciated investments.
9
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements (Cont'd)
- --------------------------------------------------------------------------------
NOTE 4 - RELATED PARTY TRANSACTIONS
The Fund is managed by Rowe Price-Fleming International, Inc. (Price-Fleming),
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 the Fund and Price-Fleming
(the Manager) provides for an annual investment management fee, computed daily
and paid monthly, consisting of an Individual Fund Fee equal to 0.50% of average
daily net assets and a Group Fee. The Group Fee is based on the combined assets
of certain mutual funds sponsored by the Manager or Price Associates (the
Group). The Group Fee rate ranges from 0.48% for the first $1 billion of assets
to 0.31% for assets in excess of $34 billion. The effective annual Group Fee
rate at October 31, 1994, and for the year then ended was 0.34%. The Fund pays a
pro rata portion of the Group Fee based on the ratio of the Fund's net assets to
those of the Group.
Under the terms of the investment management agreement, the Manager is
required to bear any expenses through October 31, 1995, which would cause the
Fund's ratio of expenses to average net assets to exceed 1.50%. Thereafter, the
Fund is required to reimburse the Manager for these expenses, provided that
average net assets have grown or expenses have declined sufficiently so as to
cause the Fund's ratio of expenses to average net assets not to exceed 1.50% in
any month, and that no such reimbursement shall be made to the Manager after
October 31, 1997.
Pursuant to this agreement and a previous agreement which expired December 31,
1993, $30,000 of management fees were not accrued by the Fund for the year ended
October 31, 1994. Pursuant to the previous agreement, $311,000 of unaccrued fees
from the year ended December 31, 1992, and the ten months ended October 31,
1993, remain subject to reimbursement through December 31, 1995.
During the year ended October 31, 1994, the Fund, in the ordinary course
of business, paid commissions of $463,000 to, and placed security purchase and
sale orders aggregating $93,841,000 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions at the direction
of Price-Fleming.
T. Rowe Price Services, Inc. (TRPS) and Retirement Plan Services, Inc.
(RPS) are wholly owned subsidiaries of Price Associates. TRPS provides transfer
and dividend disbursing agent functions and shareholder services for all
accounts. RPS provides subaccounting and recordkeeping services for certain
retirement accounts invested in the Fund. Price Associates, under a separate
agreement, calculates the daily share price and maintains the financial records
of the Fund. For the year ended October 31, 1994, the Fund incurred fees
totalling approximately $619,000 for these services provided by related parties.
At October 31, 1994, these investment management and service fees payable were
$248,000.
10
<PAGE>
Financial Highlights
T. Rowe Price Japan Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
---------------------------------------------------------------
From
December 30, 1991
Year Ten Months (Commencement of
Ended Ended Operations) to
October 31, October 31, December 31,
1994 1993++ 1992
---------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................... $11.58 $ 8.64 $10.00
------ ------ ------
Investment Activities
Net investment income................. (0.06)* (0.05)* (0.01)*
Net realized and unrealized gain
(loss).............................. 0.97 2.99 (1.35)
------ ------ ------
Total from Investment Activities.......... 0.91 2.94 (1.36)
------ ------ ------
Distributions
Net realized gain..................... (0.85) -- --
------ ------ ------
NET ASSET VALUE, END OF PERIOD............ $11.64 $11.58 $ 8.64
====== ====== ======
- -----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Total Return.............................. 9.3% 33.7% (13.4)%
Ratio of Expenses to Average
Net Assets............................ 1.50%* 1.50%+* 1.50%*
Ratio of Net Investment Income to
Average Net Assets.................... (0.68)% (0.58)%+ (0.22)%
Portfolio Turnover Rate................... 61.5% 61.4%+ 41.6%
Net Assets, End of Period
(in thousands)........................ $203,303 $87,163 $45,792
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
++ The Fund's fiscal year-end was changed to October 31.
* Excludes expenses in excess of a 1.50% voluntary expense limitation in
effect through October 31, 1995.
+ Annualized.
11
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of
T. Rowe Price Japan Fund
In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the selected per share
data and information (which appears under the heading "Financial Highlights")
present fairly, in all material respects, the financial position of T. Rowe
Price Japan Fund (one of the portfolios constituting T. Rowe Price International
Funds, Inc.) at October 31, 1994, the results of its operations, the changes in
its net assets and the selected per share data and information for each of the
fiscal periods presented in conformity with generally accepted accounting
principles. These financial statements and selected per share data and
information (hereafter referred to as "financial statements") are the
responsibility of the Fund's 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 October 31, 1994 by
correspondence with custodians and brokers and, where appropriate, the
application of alternative auditing procedures for unsettled security
transactions, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Baltimore, Maryland
November 17, 1994
12
<PAGE>
- --------------------------------------------------------------------------------
T. Rowe Price No-Load Mutual Funds
- --------------------------------------------------------------------------------
STABILITY
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
CONSERVATIVE INCOME
Adjustable Rate U.S. Government
Short-Term Bond
Short-Term Global Income
Summit Limited-Term Bond
U.S. Treasury Intermediate
Florida Insured Intermediate Tax-Free
Maryland Short-Term Tax-Free Bond
Summit Municipal Intermediate
Tax-Free Insured Intermediate Bond
Tax-Free Short-Intermediate
INCOME
Global Government Bond
GNMA
New Income
Spectrum Income
Summit GNMA
U.S. Treasury Long-Term
California Tax-Free Bond
Georgia Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Tax-Free Income
Virginia Tax-Free Bond
AGGRESSIVE INCOME
High Yield
International Bond
Tax-Free High Yield
CONSERVATIVE GROWTH
Balanced
Capital Appreciation
Dividend Growth
Equity Income
Equity Index
Growth & Income
Spectrum Growth
Value
GROWTH
Blue Chip Growth
European Stock
Growth Stock
International Stock
Japan
Mid-Cap Growth
New Era
Small-Cap Value
AGGRESSIVE GROWTH
International Discovery
Latin America
New America Growth
New Asia
New Horizons
OTC
Science & Technology
PERSONAL STRATEGY FUNDS
Personal Strategy Income
Personal Strategy Balanced
Personal Strategy Growth
Call if you want to know about any T. Rowe Price Fund. We'll send you a
prospectus with more complete information, including management fees and other
expenses. Read it carefully before you invest or send money.
13
<PAGE>
- --------------------------------------------------------------------------------
Shareholder Services
- --------------------------------------------------------------------------------
To help shareholders monitor their current investments and make decisions that
accurately reflect their financial goals, T. Rowe Price offers a wide variety of
information and services -- at no extra cost.
KNOWLEDGEABLE SERVICE REPRESENTATIVES
BY PHONE--Shareholder service representatives are available from 8:00 a.m. to
10:00 p.m., Monday - Friday, and weekends from 9:00 a.m. to 5:00 p.m., E.T.
Call 1-800-225-5132 to speak directly with a representative who will be able
to assist you with your accounts.
IN PERSON--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While there,
you can drop off applications or obtain prospectuses and other literature.
AUTOMATED 24-HOUR SERVICES
Tele*Access(R) (1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment, and
fund prices and yields. Additionally, you have the ability to request
prospectuses, statements, account and tax forms; reorder checks; and initiate
purchase, redemption, and exchange orders for identically registered accounts.
PC*Access(R) provides the same information as Tele*Access, but on a
personal computer via dial-up modem.
ACCOUNT SERVICES
Checking--Write checks for $500 or more on any money market and bond
fund accounts (except the High Yield Fund).
Automatic Investing--Build your account over time by investing directly
from your bank account or paycheck with Automatic Asset Builder. Additionally,
Automatic Exchange enables you to set up systematic investments from one fund
account into another, such as from a money fund into a stock fund. A low, $50
minimum makes it easy to get started.
Automatic Withdrawal--If you need money from your fund account on a
regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options--Reinvest all or some of your
distributions, or take them in cash. We give you maximum flexibility and
convenience.
INVESTMENT INFORMATION
Combined Statement--A comprehensive overview of your T. Rowe Price
accounts. The summary page gives your earnings by tax category, provides total
portfolio value, and lists your investments by type -- stock, bond, and money
market. Detail pages itemize account transactions by fund.
Quarterly Shareholder Reports--Portfolio managers review the performance
of the funds in plain language and discuss T. Rowe Price's economic outlook.
The T. Rowe Price Report--A quarterly newsletter with relevant articles
on market trends, personal financial planning, and T. Rowe Price's economic
perspective.
Insights--A library of information that includes reports on mutual fund
tax issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit (also
available on disk for PC use), and Guide to Risk-Adjusted Performance can help
you determine and reach your investment goals.
DISCOUNT BROKERAGE
You can trade stocks, bonds, options, precious metals, and other securities at a
substantial savings over regular commission rates. Call a shareholder service
representative for more information.
14
