<PAGE>
Fellow Shareholders
The brief summer rally in Japanese stocks fizzled out last quarter, bringing
your fund's unsettling fiscal year to a somber conclusion. The market was dogged
all year by a stalled economy, deflation, an abundance of bad loans at banks,
and, until recently, the strong yen's restraining effect on international
demand.
Although the yen weakened in the last quarter, making Japanese stocks
more affordable to foreigners, local investors remained on the sidelines,
concerned about the sluggish economy and the shakiness of the banking system.
While the market produced positive returns in local currency terms, the
strengthening dollar led to losses for U.S. investors. In dollar terms, the
Tokyo Stock Exchange First Section (large companies) fell 9.1% for the three-
month period and the Second Section (smaller companies) dropped 2.9%. They were
also down significantly for the year. Smaller companies, which represent about
15% of your fund, were especially hurt by the poor economic climate, although
they rebounded strongly in the last quarter.
Your fund's results for the quarter, though negative, exceeded the
large-company index by a wide margin, but lagged the small-company benchmark.
Performance was helped by our strategy of shunning troubled financial stocks,
particularly banks, in favor of areas that benefit more from the weakening yen
and slowly improving economy. Nevertheless, the
Performance Comparison
<TABLE>
<CAPTION>
Periods Ended 10/31/95
3 Months 12 Months
--------- ---------
<S> <C> <C>
Japan Fund -3.6% -12.9%
TSE First Section Index -9.1 -15.5
TSE Second Section Index -2.9 -19.3
_______________________________________________
</TABLE>
market's general malaise caused the fund to show a loss for the fiscal year,
though not as deep as our benchmarks' losses.
Market Review
In the most important development of the quarter, the government finally
awoke from its slumber with a vengeance. Recognizing the threat of deflation,
the Bank of Japan cut the Official Discount Rate by another 50 basis points to
0.5%, began outright intervention in the foreign exchange markets, and
vigorously purchased bonds to inject liquidity into the banking system. In
September, the government also announced eight trillion yen (about $80 billion)
in new expenditures in the sixth supplementary budget since August 1992. That
alone should increase economic growth by more than 1.5% over the next 18
months.
The government also attacked the main source of the banks' bad debt
problems--the real estate industry. Despite earlier resistance, some public
money will likely be tapped to prevent the collapse of housing loan companies.
In addition, the government is likely to ease the confiscatory capital gains
taxes that have hampered liquidity in the real estate market. Those moves,
coupled with improving bank operating margins spurred by record low short-term
interest rates, should help banks dig out of their debt hole within the next
three to five years.
These stimulus measures were sorely needed to bolster the sluggish
economy. Industrial production declined steadily since the spring, a worsening
inventory/shipments ratio portended further production cutbacks, housing starts
remained weak, unemployment reached a record level (3.2%), and overall retail
sales dropped. The biggest problem remains deflation: wholesale prices have been
falling, severely crimping corporate profits. In
<PAGE>
a typical move, the auto companies, facing slack overseas demand all year due to
the generally strong yen, asked all their suppliers for 30% price cuts over the
next two years. One bright spot in the economy was a rise in capital
expenditures to replace machines installed in the late 1980s.
While financial issues continued to underperform due to the banking
crisis, electrical and basic materials companies benefited from the weakness of
the yen and improved earnings prospects.
Portfolio Strategy
During the quarter, we maintained your fund's emphasis on capital equipment
stocks at 43% of net assets. These companies have valuations that are about
half the level of the overall market and good growth prospects as the economy
gradually improves. In particular, we like component and industrial electronic
companies, which were helped by strong demand for personal computers and mobile
telecommunications. During the quarter, we added the former national telephone
monopoly, NTT, encouraged by its renewed focus on profits. In addition, we own
the leading mobile telecommunications operator DDI. However, we took profits in
some companies that enjoyed strong runs, such as semiconductor equipment
manufacturer Advantest.
Our other main focus is on service industries. Since we expect consumer
spending to pick up as the economy improves, we remained overweighted in well-
managed, large retailers such as Marui and Ito-Yokado. The fund also holds some
fast-growing smaller retailers, such as Sogo Denki (electrical appliances).
Given our growth emphasis, the fund has no exposure to banks and
electric utilities and is underweighted in basic material suppliers because of
their poor long-term prospects. However, we remained overweighted in housing-
related stocks because of attractive valuations and a favorable outlook arising
from the shortage of housing in Japan.
Industry Diversification
[CHART APPEARS HERE]
Edgar description: A pie chart showing percent of net assets invested in various
industry sectors as of 10/31/95.
________________________________________________________________________________
As for currency strategy, your fund remained unhedged over the last
year. Despite tremendous volatility in yen/dollar exchange rates during the
year, the net fluctuation was limited, justifying our strategy. While the yen
will likely encounter some periods of weakness, we believe it will experience
gradual, long-term appreciation versus the dollar, benefiting returns to U.S.
investors and reducing the need for hedging. Of course, if our view changes, we
will reconsider our strategy. Our main focus, as always, remains on selecting
stocks that will produce above-average returns given a reasonable investment
environment.
Outlook
After a few false starts in the last two years, we believe the economy is
poised to recover modestly, with growth of around 2% next year and further
expansion in 1997 and 1998. Longer-term interest rates are at record lows and,
assuming subdued inflation, should rise gently over the next six months, but
not enough to tarnish the appeal of equities relative to bonds. The weaker yen,
improving international demand, a more stable domestic situation, and corporate
restructuring should help earnings rebound over the next two
2
<PAGE>
years. Most important, valuations in some areas of the market, especially those
sensitive to the improving economy such as manufacturing and retailing, still
look reasonable.
One note of caution: any wavering by the government on planned stimulus
measures could lead to a setback for the economy and the stock market.
Otherwise, we believe U.S. investors can expect reasonable returns from the
Japanese market in the next year.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
President
November 17, 1995
Portfolio Highlights
Periods Ended October 31, 1995
<TABLE>
<CAPTION>
Change in Price Per Share
- -------------------------------
<S> <C>
3 Months (From $9.74 to $9.39) $ -0.35
12 Months (From $11.64 to $9.39) -2.25
- ---------------------------------------------------
Total Net Assets $181.4 million
___________________________________________________
</TABLE>
Twenty-Five Largest Holdings
October 31, 1995
<TABLE>
<CAPTION>
Percent of
Net Assets
----------
<S> <C>
Kyocera 3.7%
Mitsubishi Heavy Industries 3.2
Nippon Denso 2.9
NEC 2.8
Nippon Steel 2.8
Mitsui Fudosan 2.7
Canon 2.5
Nomura Securities 2.5
Hitachi 2.3
East Japan Railway 2.3
Matsushita Electric Industrial 2.2
Ito-Yokado 2.2
Sharp 2.1
Sankyo 2.1
Marui 2.1
Sekisui Chemical 2.0
TDK 2.0
Daiichi Pharmaceutical 1.8
Sumitomo 1.8
Daiwa House 1.8
Sumitomo Electric 1.8
Sony 1.7
Kuraray 1.6
Fanuc 1.6
Murata Manufacturing 1.6
- ---------------------------------------
Total 56.1%
_______________________________________
</TABLE>
3
<PAGE>
Average Annual Compound Total Return
Periods Ended October 31, 1995
<TABLE>
<CAPTION>
Since Inception
1 Year (12/30/91)
-------- ---------------
<S> <C>
-12.87% 2.57%
</TABLE>
________________________________________________________________________________
Note: For the above periods ended 9/30/95, the fund's returns were -7.55%
and 3.63%, respectively.
Investment 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
[INSERT CHART HERE]
<TABLE>
<CAPTION>
Japan Tokyo Stock
Fund Exchange 1
------ -----------
<S> <C> <C>
12/31/91 $10,000 $10,000
10/31/92 8,580 7,558
10/31/93 11,580 10,048
10/31/94 12,652 11,598
10/31/95 11,024 10,048
</TABLE>
________________________________________________________________________________
Security Classification
October 31, 1995
<TABLE>
<CAPTION>
Percent Market
of Net Cost Value
Assets (000) (000)
------- -------- --------
<S> <C> <C> <C>
Common Stocks
and Warrants 97.0% $189,453 $175,906
Short-Term
Investments 2.9 5,211 5,211
---- -------- --------
Total Investments 99.9 194,664 181,117
Other Assets Less
Liabilities 0.1 274 266
- ----------------------------------------------
Total Net Assets 100.0% $194,938 $181,383
______________________________________________
</TABLE>
4
<PAGE>
Statement of Net Assets
T. Rowe Price Japan Fund/October 31, 1995
(values in thousands)
<TABLE>
<CAPTION>
Value
-------
JAPAN -- 97.0%
COMMON STOCKS & WARRANTS
<S> <C> <C>
288,000 shs Amada....................... $ 2,872
10,000 Amway Japan................. 381
21,000 Apollo Electronics.......... 519
7,200 Asatsu...................... 248
34,000 Avon Products............... 141
267,000 Canon....................... 4,568
6,000 Canon Sales................. 142
7,000 Chofu Seisakusho............ 164
174,000 Citizen Watch............... 1,192
271,000 * Dai Nippon Screen
Manufacturing.......... 2,421
39,000 Daibiru..................... 397
64,000 Daifuku..................... 763
238,000 Daiichi Pharmaceutical...... 3,327
219,000 Daiwa House................. 3,276
216 DDI......................... 1,751
7,000 Disco....................... 263
897 East Japan Railway.......... 4,235
8,000 Eidensha.................... 93
560 wts * Eidensha, 2/14/96 (DEM)..... 9
4,000 shs Emoto Industry.............. 54
13,000 Enix........................ 470
4,000 Enplas...................... 87
7,000 F.C.C....................... 216
67,000 Fanuc....................... 2,902
9,000 Glory....................... 316
25,000 * Hamada Printing Press....... 172
4,200 Hirose Electric............. 268
415,000 Hitachi..................... 4,260
28,000 Hitachi Tool Engineering.... 153
569,000 Hitachi Zosen............... 2,798
119,000 Honda Motor................. 2,071
18,000 Horiba...................... 202
37,000 Idec Izumi.................. 318
155,000 Inax........................ 1,397
24,000 Ishiguro Homa............... 429
74,000 Ito-Yokado.................. 4,044
54,000 Iwata Air Compressor
Manufacturing........... 267
42,000 Japan Airport Terminal...... 480
28,000 Japan Living Service........ 177
226,000 Japan Synthetic Rubber...... 1,379
17,000 Juel Verite Ohkubo.......... 117
40 wts * Juel Verite Ohkubo,
3/10/98 (CHF).......... 3
33,000 shs Juken Sangyo................ 381
10,000 Kansai Sekiwa Real Estate... 166
8,000 Kato Denki.................. 210
4,200 Keyence..................... 517
13,000 Kirin Beverage.............. 197
16,000 KOA......................... 260
253,000 Komatsu..................... 1,979
108,000 Komori...................... 2,555
15,400 KTK Telecommunications
Engineering............ 155
330,000 Kumagai Gumi................ 1,265
299,000 Kuraray..................... 2,952
83,000 Kyocera..................... 6,799
9,200 Kyokuto Kaihatsu Kogyo...... 202
4,000 Levi Strauss Japan
Kabushiki Kaisha...... 59
9,000 Lintec...................... 128
9,100 Mabuchi Motor............... 551
216,000 Marui....................... 3,737
3,000 * Maruwa Ceramic.............. 226
7,000 Masaru...................... 52
3,700 Matsumotokiyoshi............ 87
287,000 Matsushita Electric
Industrial............ 4,068
34,000 Meitec...................... 555
38,000 Meitetsu Transport.......... 218
1,500 wts * Meitetsu Transport,
4/30/97 (CHF)......... 63
132,000 shs Mitsubishi.................. 1,458
755,000 Mitsubishi Heavy
Industries............ 5,823
433,000 Mitsui Fudosan.............. 4,952
146,000 Mitsui Petrochemical
Industries............ 1,158
12,000 Mori Seiki.................. 237
11,000 Mos Food Services........... 275
82,000 Murata Manufacturing........ 2,878
27,000 Namura Shipbuilding......... 150
108,000 National House.............. 1,837
6,000 Natoco Paint................ 88
385,000 NEC......................... 5,081
32,000 New Japan Securities........ 150
50,000 Nichicon.................... 675
5,000 Nichiei..................... 310
3,000 Nihon Dempa Kogyo........... 77
25,000 * Nippon Columbia............. 142
285,000 Nippon Denso................ 5,210
40,000 Nippon Denwa Shisetsu....... 331
79,000 Nippon Hodo................. 1,228
11,000 Nippon Kagaku Yakin......... 104
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
Value
-------
<S> <C> <C>
27,000 shs Nippon Konpo Unyu Soko...... 219
25,000 Nippon Seiki................ 276
1,531,000 Nippon Steel................ 5,074
276 Nippon Telephone
& Telecom............... 2,264
36,000 Nippon Thompson............. 294
26,000 Nippon Yusoki............... 102
6,000 Nissha Printing............. 73
27,000 Nitta....................... 446
248,000 Nomura Securities........... 4,534
20,000 Okasan Securities........... 80
13,000 Osaka Organic Chemical...... 116
12,000 Paltac...................... 129
144,000 Pioneer Electronic.......... 2,210
7,800 Promise..................... 307
11,700 Rinnai...................... 259
80,000 Ryoyo Electro............... 1,869
5,000 Sangetsu.................... 113
17,000 Sanken Electric............. 160
170,000 Sankyo...................... 3,739
11,000 * Sankyo Engineering.......... 176
14,000 Sanoyas Hishino Meisho...... 68
24,000 * Sanyo Securities............ 73
30,000 Sega Enterprises............ 1,590
279,000 Sekisui Chemical............ 3,627
214,000 Sekisui House............... 2,469
11,000 Senshukai................... 206
275,000 Sharp....................... 3,817
101,000 Shinetsu Chemical........... 2,064
9,000 Shinkawa.................... 321
36,000 Sintokogio.................. 268
2,900 SMC......................... 204
42,000 * Sodick...................... 398
44,000 Sogo Denki.................. 196
70,400 Sony........................ 3,166
363,000 Sumitomo.................... 3,300
283,000 Sumitomo Electric........... 3,265
166,000 Sumitomo Forestry........... 2,337
20,000 Tamura...................... 129
70,000 TDK......................... 3,606
7,000 Techno Ryowa................ 133
452,000 Teijin...................... 2,072
29,000 Toc......................... 270
12,000 Tohoku
Telecommunications...... 60
23,000 Tokai Rubber Industries..... 259
224,000 Tokio Marine &
Fire Insurance.......... 2,299
45,000 Tokyo Electronics........... 1,953
125,000 Tokyo Steel Manufacturing... 2,322
96,000 Toppan Printing............. 1,267
34,000 shs Topre....................... 243
32,000 * Toshiba Tungaloy............ 199
12,000 Toyo Communication
Equipment.............. 223
41,000 Toyo Steel.................. 130
7,200 Trusco Nakayama............. 137
7,000 Uniden...................... 113
30,000 Wako Securities............. 199
10,600 Xebio....................... 394
27,000 * Yamatane Securities......... 85
24,000 Yamato Kogyo................ 190
22,000 York Benimaru............... 697
12,600 Yurtec...................... 229
Total Japan 175,906
SHORT-TERM INVESTMENTS-- 2.9%
COMMERCIAL PAPER
2,000,000 USD Asset Securitization Coopera-
tive, 5.73%, 11/15/95..... 1,989
1,000,000 BMW U.S. Capital,
5.68%, 1/19/96............ 986
2,000,000 Preferred Receivables Funding,
5.75%, 11/3/95............ 1,994
242,207 Investments in Commercial
Paper through a joint account,
5.87-5.88%, 11/1/95....... 242
Total Short-Term Investments 5,211
____________________________________________________________
Total Investments in Securities -- 99.9%
of Net Assets (Cost $194,664) 181,117
____________________________________________________________
Other Assets Less Liabilities................... 266
-------
</TABLE>
<TABLE>
<CAPTION>
Value
--------
<S> <C> <C>
Net Assets Consist of:
Accumulated net realized gain/loss -
net of distributions....................... $ (2,717)
Net unrealized gain (loss)................... (13,556)
Paid-in-capital applicable to
19,313,467 shares of $0.01 par
value capital stock outstanding;
2,000,000,000 shares of the
Corporation authorized..................... 197,656
--------
Net Assets................................... $181,383
========
Net Asset Value Per Share.................... $9.39
========
_____________________________________________________________________
</TABLE>
* Non-income producing
CHF Swiss franc
DEM German deutschemark
USD U.S. dollar
The accompanying nots are an integral part of these financial statements.
6
<PAGE>
Statement of Operations
T. Rowe Price Japan Fund / Year Ended October 31, 1995
(in thousands)
<TABLE>
<S> <C>
INVESTMENT INCOME
Income
Dividend (net of foreign taxes of $196)......................... $ 1,110
Interest........................................................ 493
Other........................................................... 7
--------
Total income.................................................... 1,610
--------
Expenses
Investment management........................................... 1,523
Shareholder servicing........................................... 473
Custody and accounting.......................................... 186
Prospectus and shareholder reports.............................. 72
Registration.................................................... 60
Legal and audit................................................. 36
Directors....................................................... 9
Proxy and annual meeting........................................ 5
Miscellaneous................................................... 8
--------
Total expenses.................................................. 2,372
--------
Net investment income............................................. (762)
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) on:
Securities...................................................... (2,717)
Foreign currency transactions................................... 9
--------
Net realized gain (loss)........................................ (2,708)
--------
Change in net unrealized gain or loss on:
Securities...................................................... (22,032)
Other assets and liabilities denominated in foreign currencies.. (15)
--------
Change in net unrealized gain or loss........................... (22,047)
--------
Net realized and unrealized gain (loss)........................... (24,755)
--------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS................. $(25,517)
========
________________________________________________________________________________
</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
(in thousands)
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994
--------- ---------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM
Operations
Net investment income.............................. $ (762) $ (1,064)
Net realized gain (loss)........................... (2,708) 13,693
Change in net unrealized gain or loss.............. (22,047) (1,704)
--------- ---------
Increase (decrease) in net assets from operations.. (25,517) 10,925
--------- ---------
Distributions to shareholders
Net realized gain.................................. (12,421) (5,844)
--------- ---------
Capital share transactions*
Shares sold........................................ 179,849 318,131
Distributions reinvested........................... 11,938 5,598
Shares redeemed.................................... (175,769) (212,670)
--------- ---------
Increase (decrease) in net assets from capital
share transactions................................ 16,018 111,059
--------- ---------
Increase (decrease) in net assets.................... (21,920) 116,140
NET ASSETS
Beginning of period................................ 203,303 87,163
--------- ---------
End of period...................................... $ 181,383 $ 203,303
========= =========
________________________________________________________________________________
*Share information
Shares sold........................................ 18,735 28,189
Distributions reinvested........................... 1,180 573
Shares redeemed.................................... (18,062) (18,831)
--------- ---------
Increase (decrease) in shares outstanding.......... 1,853 9,931
========= =========
________________________________________________________________________________
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
Notes to Financial Statements
T. Rowe Price Japan Fund / October 31, 1995
Note 1 - Significant Accounting Policies
T. Rowe Price International Funds, Inc. (the Corporation) is registered
under the Investment Company Act of 1940. The 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 - Assets and liabilities are translated into U.S.
dollars at the prevailing exchange rate at the end of the reporting period.
Purchases and sales of securities and income and expenses are translated into
U.S. dollars at the prevailing exchange rate on the dates of such transactions.
The effect of changes in foreign exchange rates on realized and unrealized
security gains and losses is reflected as a component of such gains and losses.
C) Other - Income and expenses are recorded on the accrual basis.
Investment transactions are accounted for on the trade date. Realized gains
and losses are reported on the identified cost basis. Dividend income and
distributions to shareholders are recorded by the 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.
Note 2 - Investment Transactions
Consistent with its investment objective, the fund engages in the following
practices to manage exposure to certain risks or enhance performance. The
investment objective, policies, program, and risk factors of the fund are
described more fully in the fund's prospectus and Statement of Additional
Information.
A) Commercial Paper Joint Account - The fund, and other affiliated funds,
may transfer uninvested cash into a commercial paper joint account, the daily
aggregate balance of which is invested in high-grade commercial paper. All
securities purchased by the joint account satisfy the fund's criteria as to
quality, yield, and liquidity.
B) Securities Lending - To earn additional income, the fund lends its
securities to approved brokers. At October 31, 1995, the market value of
securities on loan was $7,854,000, which was fully collateralized with cash.
Although the 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.
9
<PAGE>
C) Other - Purchases and sales of portfolio securities, other than
short-term securities, aggregated $97,477,000 and $95,465,000, respectively,
for the year ended October 31, 1995.
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. The fund has unused realized capital loss carryforwards for
federal income tax purposes of $2,717,000 which expire in 2003. The fund
intends to retain gains realized in future periods that may be offset by
available capital loss carryforwards.
In order for the fund's capital accounts and distributions to
shareholders to reflect the tax character of certain transactions, $762,000 of
undistributed net investment income and $174,000 of undistributed net realized
gains were reclassified as a $588,000 decrease to paid-in-capital during the
year ended October 31, 1995. The results of operations and net assets were
not affected by the reclassifications.
At October 31, 1995, the aggregate cost of investments for federal
income tax and financial reporting purposes was $194,664,000 and net unrealized
loss aggregated $13,547,000, of which $3,926,000 related to appreciated
investments and $17,473,000 to depreciated investments.
Note 4 - Related Party Transactions
The 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 the fund and the Manager
provides for an annual investment management fee, of which $165,000 was payable
at October 31, 1995. The fee is computed daily and paid monthly, and consists
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. At October 31, 1995, and for the year then ended,
the effective annual Group Fee rate was 0.34%. The 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 was
required to bear any expenses through October 31, 1995 which would have caused
the fund's ratio of expenses to average net assets to exceed 1.50%. Thereafter
through October 31, 1997, the fund is required to reimburse the Manager for
these expenses, provided that average net assets have grown or expenses have
declined sufficiently to allow reimbursement without causing the fund's ratio
of expenses to average net assets to exceed 1.50%. Pursuant to this and a
previous agreement, $193,000 of unaccrued 1992-1993 fees were repaid during the
year ended October 31, 1995, and $148,000 remains subject to reimbursement
through December 31, 1995.
10
<PAGE>
In addition, the fund has entered into agreements with Price Associates
and two wholly owned subsidiaries of Price Associates, pursuant to which the
fund receives certain other services. Price Associates computes the daily share
price and maintains the financial records of the fund. T. Rowe Price Services,
Inc., is the fund's transfer and dividend disbursing agent and provides
shareholder and administrative services to the fund. T. Rowe Price Retirement
Plan Services, Inc., provides subaccounting and recordkeeping services for
certain retirement accounts invested in the fund. The fund incurred expenses
pursuant to these related party agreements totaling approximately $450,000 for
the year ended October 31, 1995, of which $43,000 was payable at period-end.
During the year ended October 31, 1995, the fund, in the ordinary
course of business, paid commissions of $243,000 to, and placed security
purchase and sale orders aggregating $56,792,000 with, certain affiliates of
the Manager in connection with the execution of various portfolio transactions.
11
<PAGE>
Financial Highlights
T. Rowe Price Japan Fund
<TABLE>
<CAPTION>
For a share outstanding throughout each period
--------------------------------------------------------------
Year Ended Ten Months From December 30,
October 31, Ended 1991* to
---------------------- October 31, December 31,
1995 1994 1993++ 1992
--------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................ $11.64 $11.58 $ 8.64 $10.00
------ ------ ------ ------
Investment Activities
Net investment income............................. (0.04) (0.06)** (0.05)** (0.01)**
Net realized and unrealized gain (loss)........... (1.40) 0.97 2.99 (1.35)
------ ------ ------ ------
Total from Investment Activities.................. (1.44) 0.91 2.94 (1.36)
------ ------ ------ ------
Distributions
Net realized gain................................. (0.81) (0.85) -- --
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...................... $ 9.39 $11.64 $11.58 $ 8.64
====== ====== ====== ======
__________________________________________________________________________________________________________________________
RATIOS/SUPPLEMENTAL DATA
Total Return........................................ (12.9)% 9.3%** 33.7%** (13.4)%**
Ratio of Expenses to Average Net Assets............. 1.50% 1.50%** 1.50%**+ 1.50%**
Ratio of Net Investment Income
to Average Net Assets.............................. (0.48)% (0.68)%** (0.58)%**+ (0.22)%**
Portfolio Turnover Rate............................. 62.4% 61.5% 61.4%+ 41.6%
Net Assets, End of Period (in thousands)............ $181,383 $203,303 $87,163 $45,792
__________________________________________________________________________________________________________________________
</TABLE>
+ Annualized.
++ The fund's fiscal year-end was changed to October 31.
* Commencement of operations.
** Excludes expenses in excess of a 1.50% voluntary expense limitation in
effect through October 31, 1995.
12
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders 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 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, 1995, and the results of its
operations, the changes in its 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
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, 1995 by correspondence with
custodians 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, 1995
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. ET.
Call 1-800-225-5132 to speak directly with a representative who will be
able to assist you with your accounts.
In Person--Visit one of our investor center locations to meet with a
representative who will be able to assist you with your accounts. While
there, you can drop off applications or obtain prospectuses and other
literature.
Automated 24-Hour Services
Tele*Access(R) (1-800-638-2587) provides information such as account
balance, date and amount of your last transaction, latest dividend payment,
and fund prices and yields. Additionally, you have the ability to request
prospectuses, statements, account and tax forms; reorder checks; and initiate
purchase, redemption, and exchange orders for identically registered accounts.
PC*Access(R) provides the same information as Tele*Access, but on
a personal computer via dial-up modem.
Account Services
Checking--Write checks for $500 or more on any money market and
most bond fund accounts (except the High Yield Fund and Emerging Markets
Bond Fund).
Automatic Investing--Build your account over time by investing
directly from your bank account or paycheck with Automatic Asset Builder.
Additionally, Automatic Exchange enables you to set up systematic investments
from one fund account into another, such as from a money fund into a stock
fund. A low, $50 minimum makes it easy to get started.
Automatic Withdrawal--If you need money from your fund account
on a regular basis, you can establish scheduled, automatic redemptions.
Dividend and Capital Gains Payment Options--Reinvest all or some
of your distributions, or take them in cash. We give you maximum flexibility
and 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.
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.
Performance Update--A quarterly report reviewing recent market
developments and providing comprehensive performance information for every
T. Rowe Price fund.
Insights--A library of information that includes reports on mutual
fund tax issues, investment strategies, and financial markets.
Detailed Investment Guides--Our widely acclaimed Asset Mix Worksheet,
College Planning Kit, Retirees Financial Guide, Retirement Planning Kit
(also available on disk for PC use), and Guide to Risk-Adjusted Performance
can help you determine and reach your investment goals.
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
<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
Short-Term Bond
Short-Term Global Income
Short-Term U.S. Government
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
Virginia Short-Term Tax-Free Bond
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
Corporate Income
Emerging Markets Bond
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
Capital Opportunity
Emerging Markets Stock
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.
T. Rowe Price Investment
Services, Inc., Distributor
15
<PAGE>
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 distri-
bution only to shareholders and to
others who have received a copy of
the prospectus of the T. Rowe Price
Japan Fund.
[LOGO OF T. ROWE PRICE]
Annual Report
[LOGO OF T. ROWE PRICE]
Japan Fund
October 31, 1995
