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T. Rowe Price
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Annual Report
Latin America Fund
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October 31, 1996
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Report Highlights
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* Even as Latin American economies strengthened, their stock markets lost
some momentum over the past six months.
* Returns for the 12 months ended October 31 were in double-digits, led by
Argentina and Brazil.
* Your fund returned 3.56% and 26.52% for the 6- and 12-month periods,
res-pectively, lagging its benchmarks for the shorter period but exceeding
them for the year.
o Brazil remained the fund's largest commitment at 46% of net assets, up from
37% six months ago; Mexico remained second at 25%; and Argentina third at
11%.
o Although the ride will be bumpy at times, we continue to expect stocks in
this region to perform well in the long run as economic reforms continue.
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Fellow Shareholders
================================================================================
There are now a number of tangible signs of economic recovery in the larger
Latin American countries, although stock performance was uneven in recent
months. Following contraction in the first quarter of 1996, second quarter real
GDP growth in Mexico, Brazil, and Argentina picked up and appeared to extend
into the third quarter. The regional recession triggered by the late-1994
Mexican peso devaluation forced governments to push through growth-enhancing
reform measures, although progress has varied considerably from country to
country.
<PAGE>
The short-term challenges will be to nurture economic recovery while
maintaining tight control over current account balances; to attract foreign
capital once again; and to bolster reserves to more comfortable levels. Longer
term, the goal will be to follow the Chilean model of wide-ranging deregulation,
privatization, expansion of trade, fiscal discipline, higher savings rates, and
political reform. Progress across the region will be patchy as ever, but we
believe the long-term trend of positive reform is irreversible and provides a
basis for equity investment that is full of opportunity.
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Performance Comparison
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Periods Ended 10/31/96 6 Months 12 Months
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Latin America Fund 3.56% 26.52%
MSCI EMF Latin America Index 5.90 23.34
Lipper Latin America Funds Average 5.18 26.06
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Your fund participated fully in the resurgence of Latin American stocks
over the past year. Its gain of 26.52% outstripped the benchmark index and was
also slightly above the average return of similar funds, as shown in the table.
Gains were considerably smaller in the most recent six-month period, and the
fund's advance trailed the benchmark mainly because some of the small-cap stocks
in the portfolio gave back some of their earlier outperformance.
Considering the extent of economic dislocation in Mexico, the speed of its
recovery and that of the banking sector was encouraging. Exporters continued to
benefit from the weak peso (even though the peso depreciated less than inflation
year-to-date), and the trade balance will be in significant surplus again in
1996. On the other hand, consumers remain subdued following a period of sharp
drops in real wages and rising levels of debt. Reserves are still at
uncomfortably low levels, and investors will be watching for any deterioration
in the trade balance as the economy recovers and also will be focusing on the
government's continuing commitment to push through reforms. (In October, for
example, the government announced that it had backed away from plans to fully
privatize Pemex's petrochemical plants, after which interest rates rose abruptly
and the peso weakened.) We see the economy entering a more solid growth phase in
1997 and 1998 as confidence returns and the banks once again begin to expand
their loans. Having cut weightings in retailer Cifra, our 25% commitment to this
market is now more or less neutral.
<PAGE>
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Market Performance
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(In U.S. Dollar Terms)
Periods Ended 10/31/96 6 Months 12 Months
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Argentina - 3.23% 33.21%
Brazil 19.27 33.03
Chile - 0.47 - 1.36
Mexico - 4.86 23.75
Peru - 2.78 17.75
Venezuela 50.29 30.93
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Source: FAME Information Services, Inc., using MSCI Indices.
- --------------------------------------------------------------------------------
The Brazilian economy is also on a recovery path. Industrial production
growth has been positive since May, and retail sales, boosted by increased use
of credit, have been surprisingly robust. Strong import growth has put pressure
on the trade balance, which focused attention once more on the currency. Many
analysts believe the real to be overvalued. On the political front, there is
much talk about a constitutional amendment that would allow President Cardoso to
be reelected. Bearing in mind the huge progress made since Cardoso became
Finance Minister back in May 1993, this would be regarded as a positive
development. The major stock market theme this year was the privatization and
restructuring of the telecommunications and electricity sectors, which together
account for over 40% of the MSCI Brazilian index. Although many uncertainties
remain, long-term investors will be hoping to enjoy the significant benefits of
a shift to private enterprise under a clearly defined regulatory structure that
would allow a market return on assets. In the portfolio, this theme is
represented mainly through the telecommunications bellwether stock
Telecomunicacoes Brasileiras, which has outperformed strongly this year. Overall
your portfolio is marginally overweighted in Brazil at 46% of net assets.
Politics took center stage in Argentina, where Finance Minister Cavallo,
architect of the country's orthodox reform program, was unceremoniously sacked
at a time of 17% unemployment (versus just 7% at the end of 1992), increasingly
restless unions, and an economy still mired in recession. Cavallo has since
countered with allegations of corruption against cabinet members. Although there
was a brief uptick in short-term interest rates following his departure,
confidence appears to be returning and industrial production grew 9.2% from
September to September. Our largest positions in this market are Telefonica de
Argentina and Naviera Perez, an oil and gas conglomerate with exploration assets
in Venezuela.
The smaller Chilean economy, more or less untouched by the fallout of the
Mexican devaluation and several years ahead of the rest of the region in terms
of reform, is enjoying growth rates more normally associated with Asian
economies. First quarter GDP growth of 9%, unheard of in Latin America since the
1970s, was followed by second quarter GDP growth of 6.6% as the authorites put
on the monetary brakes to prevent overheating. In June, the price of copper -
Chile's dominant export - fell 23%, pushing the trade balance into deficit, and
<PAGE>
it seems likely that real interest rates will have to remain high to prevent
further deterioration. At the company level, cheaply valued earnings growth is
hard to find because of strong competition in many sectors. For example, falling
electricity rates have weighed down the key electricity sector that composes 46%
of the MSCI Chilean index. Primarily for this reason, Chile remains
substantially underweighted in your fund.
[Pie chart showing Geographic Diversification: Brazil 46%, Mexico 25%,
Argentina 11%, Chile 10%, Peru 2%, Venezuela 1%, Guatemala 1%, Other and
Reserves 4%]
Peru went one step further down the privatization path in June when the
government sold off an additional 23% of the telecommunications monopoly. Your
fund participated in this transaction by purchasing shares. With the trade
deficit improving and a credible policy of fiscal constraint in place, Peru's
growth should accelerate into 1997. Finally, in Venezuela, where until recently
oil revenues were an excuse to shield the country from the reform process
sweeping the rest of the region, the government is scheduled in November to
begin selling its 49% stake in the telecommunications monopoly CANTV. Hopes for
economic restructuring have been raised and dashed a number of times in the
past, and there are considerable doubts about the government's commitment to
fiscal discipline. Nevertheless, falling inflation (3.6% per month in September
versus 12.6% in May) and a more stable currency suggest improved economic
conditions, and the recent gain in Venezuelan stock prices shows that investors
are hopeful.
Summary and Outlook
Growth in the region is reemerging. Governments are committed to policy
reform which has continued, and, if anything, accelerated, despite the severe
economic challenges of the past couple of years. Valuations are cheap,
especially in Brazil, the region's largest market. Admittedly, the last two
years ending October 31 were disappointing for investors in Latin America, with
a 15.3% decline in the MSCI Latin America Index. But the same index showed a
gain of 369.6% for the six years ending this October despite the Mexican
devaluation. While we must continue to expect a volatile ride, we believe there
is every reason to hope that risk will be rewarded with superior performance
over time in this fast-changing part of the world.
Respectfully submitted,
[Signature]
Martin G. Wade
President
November 22, 1996
<PAGE>
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About Your Investment Manager
- --------------------------------------------------------------------------------
Since many of you are new investors in the T. Rowe Price international
stock funds, we want to tell you briefly about the management team behind them.
The funds are managed by Rowe Price-Fleming International, Inc., a joint venture
between T. Rowe Price and Robert Fleming Holdings Ltd. of London.
Rowe Price-Fleming brings a wealth of experience to international
investing. T. Rowe Price was founded in 1937, and Robert Fleming, a British
merchant bank and investment firm, was founded in 1873. Since its birth in 1979,
Rowe Price-Fleming has grown into the largest U.S. manager of international
no-load funds,* with more than $27 billion under its stewardship, including 11
stock and bond mutual funds.
While Rowe Price-Fleming's investment team is based in London, portfolio
managers are also located in Tokyo, Hong Kong, Singapore, Baltimore, and soon in
South America. The company's equity managers are responsible for specific stock
selection, but they are supported by more than 100 analysts in 14 financial
centers worldwide.
Rowe Price-Fleming's investment philosophy is straightforward and
consistent: Each equity fund seeks broad diversification among companies that
offer above-average growth prospects at reasonable valuations. While
diversifying among many different companies and industries, each fund adheres
strictly to its prospectus.
Portfolio managers combine a macroeconomic view of each market with
extensive research on individual companies. Therefore, your portfolios can
potentially benefit from positive economic trends as well as from the selection
of individual stocks that may perform well regardless of economic conditions.
Rowe Price-Fleming believes that its emphasis on faster-growing foreign
economies, broad diversification, and strong commitment to fundamental research
helps it identify the best opportunities in international stocks.
*Strategic Insight Simfund
================================================================================
<PAGE>
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Portfolio Highlights
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Industry Diversification
Percent of Percent of
Net Assets Net Assets
4/30/96 10/31/96
- --------------------------------------------------------------------------------
Services 34.2% 36.7%
Energy 18.8 18.5
Consumer Goods 13.7 13.8
Materials 12.2 11.9
Finance 8.7 11.2
Multi-Industry 3.6 3.4
Miscellaneous 0.6 -
Reserves 8.2 4.5
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Total 100.0% 100.0%
================================================================================
================================================================================
Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
10/31/96
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Telecomunicacoes Brasileiras, Brazil ............................ 13.5%
Cemex, Mexico ................................................... 5.2
Telefonos de Mexico, Mexico ..................................... 5.0
Banco Bradesco, Brazil .......................................... 4.2
Brahma, Brazil .................................................. 3.3
Telefonica de Argentina, Argentina .............................. 3.3
Electrobras, Brazil ............................................. 3.0
Naviera Perez, Argentina ........................................ 2.9
Cia Energetica Minas Gerais, Brazil ............................. 2.8
Telecomunicacoes de Sao Paulo, Brazil ........................... 2.7
Cifra, Mexico ................................................... 2.7
Usiminas, Brazil ................................................ 2.2
Kimberly-Clark, Mexico .......................................... 2.0
Panamerican Beverages, Mexico ................................... 1.8
Brasmotor, Brazil ............................................... 1.8
<PAGE>
Empresa Nacional de Electricidad, Chile ......................... 1.8
Enersis, Chile .................................................. 1.7
Chilectra, Chile ................................................ 1.7
Grupo Financiero Banamex, Mexico ................................ 1.6
Banco Frances del Rio, Argentina ................................ 1.5
Petrol Brasileiros, Brazil ...................................... 1.4
Grupo Modelo, Mexico ............................................ 1.4
Companhia Siderurgica Nacional, Brazil .......................... 1.3
Cia Cimento Portland Itau, Brazil ............................... 1.3
YPF Sociedad Anonima, Argentina ................................. 1.3
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Total ........................................................... 71.4%
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Performance Comparison
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This chart shows the value of a hypothetical $10,000 investment in the 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.
[SEC Chart Sowing Latin America Fund $8211, MSCI EMF latin America $10,315,
Lipper Latin America Funds Average $8,329]
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Average Annual Compound Total Return
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This table shows how the 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 10/31/96 1 Year Inception Date
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Latin America Fund 26.52% - 6.71% 12/29/93
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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>
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For a share outstanding throughout each period
================================================================================
Financial Highlights
Year 12/29/93
Ended to
10/31/96 10/31/95 10/31/94
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NET ASSET VALUE
Beginning of period ............. $ 6.49 $ 10.32 $ 10.00
Investment activities
Net investment income ... 0.10 0.05 (0.03)
Net realized and
unrealized gain (loss) .. 1.60 (3.92) 0.29
Total from
investment activities ... 1.70 (3.87) 0.26
Distributions
Net investment income ... (0.06) -- --
Redemption fees added
to paid-in-capital .............. 0.01 0.04 0.06
NET ASSET VALUE
End of period ................... $ 8.14 $ 6.49 $ 10.32
Ratios/Supplemental Data
Total return .................... 26.52% (37.11)% 3.20%
Ratio of expenses to
average net assets .............. 1.66% 1.82% 1.99%+
Ratio of net investment
income to average
net assets ...................... 1.29% 0.76% (0.35)%+
Portfolio turnover rate ......... 22.0% 18.9% 12.2%+
Average commission rate paid .... $ 0.0001 $- $-
Net assets, end of period
(in thousands) .................. $ 213,691 $ 148,600 $ 198,435
- --------------------------------------------------------------------------------
+ Annualized.
================================================================================
The accompanying notes are an integral part of these financial statements.
October 31, 1996
<PAGE>
================================================================================
Statement of Net Assets
- --------------------------------------------------------------------------------
Shares/Par Value
In thousands
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ARGENTINA 11.2%
Common Stocks 11.1%
Astra Cia Argentina de Petroleo ..................... 336,320 $ 606
Banco Frances del Rio ADR (USD) ..................... 124,720 3,274
Capex (Class A) GDR (USD) ........................... 24,500 358
Capex (Class A) GDR (144a) (USD) .................... 6,100 89
Central Costanera ADR (USD) ......................... 14,000 439
Enron Global Power & Pipeline (USD) ................. 24,648 693
Mirgor ADS (USD) .................................... 83,000 141
Naviera Perez (Class B) ............................. 964,784 6,127
Quilmes Industrial (USD) ............................ 21,000 215
Telecom Argentina Stet (Class B) ADR (USD) .......... 15,650 591
Telefonica de Argentina (Class B) ADR (USD) ......... 289,197 6,724
Telefonica de Argentina (Class B) ADS (USD) ......... 13,270 309
Transportadora de Gas del Sur ADR (USD) ............. 117,731 1,369
YPF Sociedad Anonima (Class D) ADR (USD) ............ 120,194 2,734
23,669
Preferred Stocks 0.1%
Quilmes Industrial ADR, new (USD) * .............. 29,500 310
310
Total Argentina (Cost $25,487) ................... 23,979
BELIZE 0.3%
Common Stocks 0.3%
BHI (USD) ................................... 31,333 591
Total Belize (Cost $542) .................... 591
BRAZIL 45.6%
Common Stocks 9.0%
<PAGE>
Ceteco Holding (NLG) ....................... 16,318 925
Cia Paranaense de Energia Copel ............ 23,763,000 245
Cia Paulista de Forca e Luz ................ 8,980,000 826
Companhia Siderurgica Nacional ............. 113,183,393 2,809
Eletrobras ................................. 20,545,863 6,379
Pao de Acucar GDR (USD) .................... 59,000 1,158
Telecomunicacoes Brasileiras ............... 49,844,000 3,037
Telecomunicacoes de Minas Gerais ........... 279,267 $ 34
Telecomunicacoes de Sao Paulo * ............ 1,123,616 192
15,605
Preferred Stocks 36.6%
Artex .......................................... 220,951,941 129
Banco Bradesco ................................. 1,064,228,775 9,074
Banco Itau ..................................... 5,975,000 2,588
Banco Nacional ................................. 53,568,000 0
Brahma ......................................... 11,574,555 7,154
Brasmotor ...................................... 11,146,000 3,786
Centrais Electricas de Santa Catarina .......... 351,000 297
Ceval Alimentos ................................ 36,100,000 339
Cia Bras de Frigorificos ....................... 678,000 317
Cia Cimento Portland Itau ...................... 10,533,507 2,768
Cia Energetica Minas Gerais .................... 62,141,595 1,978
Cia Energetica Minas Gerias ADR (144a) (USD) * . 10,283 325
Cia Energetica Minas Gerias ADR, cv. (USD) * ... 2,258 71
Cia Energetica Minas Gerais ADR, sponsored,
non voting (USD) * ..................... 113,043 3,575
Cia Tecidos Norte de Minas ..................... 2,699,998 907
Distribuidora de Petroleo Ipiranga ............. 33,850,000 395
Dixie Toga ..................................... 1,143,023 857
Duratex ........................................ 12,000,000 430
Electricidade de Sao Paulo ..................... 6,090,000 652
Globex Utilidades .............................. 25,000 472
Kepler Weber ................................... 18,801 110
Lojas American ................................. 103,301,000 1,624
Lojas Renner ................................... 19,580,000 1,048
Multibras Eletrodomesticos ..................... 485,000 788
Petrol Brasileiros ............................. 23,561,973 3,050
Refrigeracao Parana ............................ 207,932,163 506
Telecomunicacoes Brasileiras ................... 1,136,294 84
Telecomunicacoes Brasileiras ADR (USD) ......... 341,109 25,413
Telecomunicacoes Brasileiras ADR (144a) (USD) .. 3,342 249
Telecomunicacoes de Minas Gerais ............... 6,495,000 725
Telecomunicacoes de Sao Paulo .................. 30,459,733 5,574
Telecomunicacoes de Rio de Janeiro ............. 9,383,000 904
Usiminas ....................................... 3,539,350,000 3,720
Usiminas ADR (144a) (USD) ...................... 95,000 $ 986
Wentex Textile * ............................... 334,000 975
81,870
Total Brazil (Cost $77,097) .................... 97,475
<PAGE>
CHILE 9.6%
Common Stocks 9.6%
Chile Fund (USD) ....................................... 80,000 1,740
Chilectra ADR (144a) (USD) ............................. 68,029 3,733
Chilgener ADS (USD) .................................... 87,700 1,984
Chilquinta ADR (USD) ................................... 34,000 527
Compania Cervecerias Unidas ADS (USD) .................. 66,792 1,353
Compania de Telecomunicaciones de Chile ADR (USD) ...... 19,266 1,900
Empresa Nacional de Electricidad ADS (USD) ............. 204,441 3,757
Enersis ADS (USD) ...................................... 127,131 3,734
Genesis Chile Fund (USD) ............................... 10,950 465
Santa Isabel ADR (USD) ................................. 28,000 788
Sociedad Quimica Minera de Chile ADR (USD) ............. 9,425 542
Total Chile (Cost $21,564) ............................. 20,523
COLOMBIA 0.3%
Common Stocks 0.3%
Cementos Diamante (Class B) GDS (USD) .................. 18,000 261
Gran Cadena Almacenes (Class B) ADS (USD) .............. 21,200 260
Maderas y Sinteticos Sociedad Anoma ADR (USD) .......... 14,000 199
Total Colombia (Cost $880) ............................. 720
ECUADOR 0.3%
Common Stocks 0.3%
La Cemento Nacional GDR (USD) .................... 2,754 565
Total Ecuador (Cost $543) ........................ 565
GUATEMALA 0.4%
Common Stocks 0.4%
Basic Petroleum (USD) * ........................ 26,500 808
Total Guatemala (Cost $295) .................... 808
<PAGE>
MEXICO 25.4%
Common Stocks 25.4%
Altos Hornos de Mexico * ........................... 66,000 $ 146
Apasco ............................................. 133,796 816
Banco Quadrum ADR (USD) *+ ......................... 126,100 536
Cemex .............................................. 542,000 1,837
Cemex (Class B) .................................... 991,746 3,566
Cemex ADS (144a) (USD) ............................. 817,575 5,774
Cifra ADR (USD) .................................... 4,612,018 5,719
Controladora Commercial Mexicana ................... 802,570 691
Embotelladores del Valle Anahuac (Class B) * ....... 457,050 290
Far Beneficial (Class B) ........................... 238,080 445
Fomentos Economico Mexicano (Class B) .............. 543,893 1,651
Grupo Elektra ...................................... 203,539 1,388
Grupo Financiero Banamex (Class B) ................. 1,600,000 3,384
Grupo Financiero Banamex (Class L) ................. 41,100 84
Grupo Financiero Bancomer (Class L) * .............. 8,669 3
Grupo Financiero Bancomer ADR (144a) (USD) * ....... 9,150 78
Grupo Financiero Bancomer GDS (USD) * .............. 2,555 22
Grupo Financiero Inbursa (Class B) ................. 220,000 712
Grupo Industrial Maseca (Class B) .................. 1,112,605 1,354
Grupo Modelo (Class C) ............................. 568,970 2,948
Grupo Televisa GDR (USD) ........................... 96,404 2,531
Interamericas Communications (USD) ................. 28,000 103
Jugos de Valle (Class B) * ......................... 419,940 577
Kimberly-Clark Mexico (Class A) .................... 217,711 4,198
Panamerican Beverages (Class A) ADR (USD) .......... 86,989 3,795
Sears Roebuck de Mexico (Class B) ADS (USD) * ...... 59,000 210
Sears Roebuck de Mexico (Class B) GDS (USD) * ...... 20,000 71
Seguros Comercial Americana (Class B) * ............ 945,000 282
Sigma Alimentos (Class B) .......................... 49,800 434
Telefonos de Mexico (Class L) ADS (USD) ............ 351,888 10,733
Total Mexico (Cost $71,776) ........................ 54,378
PERU 1.5%
Common Stocks 1.3%
Banco Wiese (USD) .............................. 79,000 $ 415
Cementos Lima .................................. 23,141 316
Enrique Ferreyros .............................. 15,591 15
Explosivos (Class T) * ......................... 63,428 53
Minsur (Class T) ............................... 45,104 405
Peru Real Estate (Class B) * ................... 728,333 189
Telefonica del Peru ADR (USD) .................. 61,800 1,274
<PAGE>
2,667
Corporate Bonds 0.2%
International Financial Holdings, 6.50%, 8/1/99 .. USD 290,000 453
453
Total Peru (Cost $3,174) ......................... 3,120
VENEZUELA 0.9%
Common Stocks 0.9%
Mavesa ADR (USD) ..................................... 183,436 1,169
Sudamtex de Venezuela (Class B) ADR (USD) * .......... 87,202 469
Venezolana de Prerreducidos Caroni GDS (USD) ......... 60,000 312
Total Venezuela (Cost $1,942) ........................ 1,950
SHORT-TERM INVESTMENTS 3.8%
Commercial Paper 3.8%
American Express Credit, 5.26%, 12/5/96 $ ............... 1,000,000 995
Bank of America, 5.40%, 2/5/97 .......................... 1,000,000 986
Caisse des Depots et Consignations, 4(2), 5.25%, 11/13/96 1,000,000 998
Tasmanian Public Finance, 5.36%, 12/16/96 ............... 1,000,000 993
Vermont American, 4(2), 5.25%, 11/7/96 .................. 1,668,000 1,667
Yorkshire Building Society, 5.27%, 11/8/96 .............. 1,000,000 999
Yorkshire Building Society, 5.43%, 1/24/97 .............. 1,000,000 987
Investments in Commercial Paper through a joint account,
5.56 - 5.63%, 11/1/96 .................. 538,107 538
Total Short-Term investments (Cost $8,163) .............. 8,163
Total Investments in Securities
99.3% of Net Assets (Cost $211,463) ..................... $ 212,272
Other Assets Less Liabilities ........................... 1,419
NET ASSETS .............................................. $ 213,691
Net Assets Consist of:
Accumulated net investment income - net of distributions $ 2,413
Accumulated net realized gain/loss - net of distributions (44,831)
Net unrealized gain (loss) 793
Paid-in-capital applicable to 26,252,351 shares of $0.01
par value capital stock outstanding; 2,000,000,000 shares
of the corporation authorized 255,316
NET ASSETS .................. $213,691
NET ASSET VALUE PER SHARE ... $ 8.14
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<PAGE>
* Non-income producing
+ Affiliated company
4(2) Commercial paper sold within terms of a private placement memorandum,
exempt from registration under section 4.2 of the Securities Act of 1933,
as amended, and may be sold only to dealers in that program or other
"accredited investors." 144a Security was purchased pursuant to Rule
144a under the Securities Act of 1933 and may not be resold subject to that rule
except to qualified institutional buyers -- total of such securities at
year-end amounts to 5.3% of net assets.
NLG Dutch guilder
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
10/31/96
- --------------------------------------------------------------------------------
Investment Income
Income
Dividend (net of foreign taxes of $ 541) ............... $ 5,086
Interest ............................................... 634
Total income ........................................... 5,720
Expenses
Investment management .................................. 2,096
Shareholder servicing .................................. 772
Custody and accounting ................................. 192
Prospectus and shareholder reports ..................... 60
Registration ........................................... 51
Legal and audit ........................................ 26
Directors .............................................. 7
Miscellaneous .......................................... 17
Total expenses ......................................... 3,221
Net investment income .......................................... 2,499
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on
Securities ............................................. (29,372)
Foreign currency transactions .......................... (168)
Net realized gain (loss) ............................... (29,540)
Change in net unrealized gain or loss on
Securities ............................................. 65,797
Other assets and liabilities
denominated in foreign currencies ...................... (12)
Change in net unrealized gain or loss .................. 65,785
Net realized and unrealized gain (loss) ........................ 36,245
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .............. $ 38,744
==============================================================================
The accompanying notes are an integral part of these financial statements.
<PAGE>
================================================================================
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
In thousands
Year Year
Ended Ended
10/31/96 10/31/95
- --------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations
Net investment income ........................... $ 2,499 $ 1,220
Net realized gain (loss) ........................ (29,540) (12,905)
Change in net unrealized gain or loss ........... 65,785 (64,916)
Increase (decrease) in net assets from operations 38,744 (76,601)
Distributions to shareholders
Net investment income ........................... (1,323) --
Capital share transactions *
Shares sold ..................................... 96,325 100,910
Distributions reinvested ........................ 1,236 --
Shares redeemed ................................. (70,187) (75,007)
Redemption fees received ........................ 296 863
Increase (decrease) in net assets from capital
share transactions .............................. 27,670 26,766
Net Assets
Increase (decrease) during period ................... 65,091 (49,835)
Beginning of period ................................. 148,600 198,435
End of period ....................................... $213,691 $148,600
*Share information
Shares sold ..................................... 12,407 14,030
Distributions reinvested ........................ 180 --
Shares redeemed ................................. (9,239) (10,355)
Increase (decrease) in shares outstanding ....... 3,348 3,675
================================================================================
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 Latin America Fund (the fund), a
nondiversified, open-end management investment company, is one of the portfolios
established by the corporation and commenced operations on December 29, 1993.
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.
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.
Short-term debt securities are valued at amortized cost which 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.
Affiliated Companies
Investments in companies 5% or more of whose outstanding voting securities
are held by the fund are defined as "Affiliated Companies" in Section 2(a)(3) of
the Investment Company Act of 1940.
<PAGE>
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.
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.
Emerging Markets
At October 31, 1996, the fund held investments in securities of companies
located in emerging markets. Future economic or political developments could
adversely affect the liquidity or value, or both, of such securities.
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.
Other
Purchases and sales of portfolio securities, other than short-term
securities, aggregated $60,520,000 and $39,979,000, respectively, for the year
ended October 31, 1996.
<PAGE>
- --------------------------------------------------------------------------------
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 $45,003,000, of which $2,386,000 expires in 2002,
$12,876,000 in 2003 and $29,741,000 in 2004. The fund intends to retain gains
realized in future periods that may be offset by available capital loss
carryforwards.
================================================================================
Undistributed net investment income..................... $ 11,000
Paid-in-capital ........................................ (11,000)
- --------------------------------------------------------------------------------
In order for the 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 October 31, 1996. The results
of operations and net assets were not affected by the reclassifications.
At October 31, 1996, the aggregate cost of investments for federal income
tax and financial reporting purposes was $211,463,000 and net unrealized gain
aggregated $809,000, of which $33,168,000 related to appreciated investments and
$32,359,000 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 $205,000 was payable
at October 31, 1996. The fee is computed daily and paid monthly, and consists of
an individual fund fee equal to 0.75% 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 0.305% for assets in
excess of $50 billion. At October 31, 1996, and for the year then ended, the
effective annual group fee rate was 0.33%. The fund pays a pro-rata share of the
group fee based on the ratio of its net assets to those of the group.
<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 $709,000 for the year ended
October 31, 1996, of which $76,000 was payable at period-end.
During the year ended October 31, 1996, the fund, in the ordinary course of
business, paid commissions of $29,000 to, and placed security purchase and sale
orders aggregating $6,200,000 with, certain affiliates of the manager in
connection with the execution of various portfolio transactions.
================================================================================
Report of Independent Accountants
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
T. Rowe Price Latin America 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 Latin America Fund (one of the portfolios constituting T. Rowe
Price International Funds, Inc., hereafter referred to as the "Fund") at October
31, 1996, 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, 1996 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 19, 1996
<PAGE>
For yield, price, last transaction,
current balance or to conduct
transactions, 24 hours, 7 days
a week, call Tele*Access(R):
1-800-638-2587 toll free
For assistance
with your existing
fund account, call:
Shareholder Service Center
1-800-225-5132 toll free
625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
http://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 Latin America Fund.
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
<PAGE>
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
RPRTLAM
10/31/96
