Semiannual Report
Japan Fund
April 30, 1996
T. Rowe Price
Report Highlights
o After a dismal 1995, the Japanese market rebounded over the last six
months as the economy improved, attracting much foreign money.
o In other positive developments, the Bank of Japan reversed the
deflationary trend, banks attacked their bad loan problems, and the real
estate market and consumer spending showed signs of recovery.
o Unaided by currency trends, the Japan Fund returned 12.7% for the last
six months, offsetting last year's negative returns and producing a 7.3%
gain for the 12 months ended April 30.
o The fund remained overweighted in capital equipment and service
industries and underweighted in finance. Some technology stocks were
added after their mild correction.
o We expect corporate profits to improve along with the economy over the
next several years, providing a good backdrop for equity prices.
Fellow Shareholders
The Japanese market turned the corner on its forgettable performance of 1995.
Over the last six months, the beleaguered economy improved slowly but
steadily, drawing near-record amounts of foreign money into Japanese equities.
After a brief spate of selling ahead of the government's fiscal year-end in
March, domestic investors became net buyers in April. The usually strong yen
weakened slightly, which should help international demand for Japanese
products, and credit remained abundant due to further strong support from the
Bank of Japan.
Performance Comparison
Periods Ended 4/30/96 6 Months 12 Months
_____________________________________________________________________________
Japan Fund 12.67% 7.30%
TSE First Section Index 18.45 3.13
TSE Second Section Index 16.68 5.69
Exchange rate movements had little impact on your fund's returns. The Japan
Fund produced a solid 12.7% gain in U.S. dollar terms for the six months ended
April 30. This strong showing helped the fund overcome negative returns in the
first half of the 12-month period to post positive results for the year ended
in April, comfortably ahead of its benchmarks. Nevertheless, the fund trailed
the Tokyo Stock Exchange First Section (large companies) and the Second
Section (smaller companies) over the most recent six months because of our
overweightings in the electronics and housing sectors.
MARKET REVIEW
The economy continued its rebound from last year's deflation, exhibiting
modest but steady growth. The crucial consumption sector, representing 56% of
gross domestic product, finally started to show some signs of life. Wholesale
prices, which fell for most of last year due to the strong yen's negative
effect on international demand, clawed their way out of negative territory and
remained essentially flat. After nearly four years of declines, department
store sales showed a slight increase for the 12 months to April 30. Overall
retail sales also increased slightly for the year ended in February. However,
our optimism is tempered somewhat because these increases are measured off the
abnormally low levels following last year's Kobe earthquake and the Tokyo
subway gas attacks. We feel that consumption will rise slowly as job security
and incomes continue to improve.
_____________________________________________________________________________
VALUATIONS LOOK REASONABLE COMPARED WITH HISTORICAL LEVELS.
While capital expenditures also look healthier, the Bank of Japan's quarterly
Tankan survey revealed that major corporations are planning to spend only 2%
more than last year. In our opinion, this modest growth should continue,
despite the long-range strategy of moving production offshore, because simple
replacement capacity is now needed. Although it got a late start in combating
deflation, the Bank of Japan continues to print money in an effort to spur the
economy, with the money supply as measured by M1 growing 16% in the 12 months
through March.
The debate continued to rage over who should pay for the debts incurred by the
failed housing loan companies. For their part, the banks announced plans to
write off large segments of their bad debts, which will lead to sharp losses
for the fiscal year ended in March - their first annual losses in the postwar
era. Unfortunately, the banks' woes are far from over. Despite the write-offs,
their balance sheets are still sullied by other problem loans, notably from
other nonbank financial firms and the former Japan National Railways Company.
The good news is that low interest rates should help banks maintain their
continued record operating profits and cope with the bad loans remaining on
their books.
Another encouraging sign has been the improving real estate market. Having
fallen about 80% from their peak in the late 1980s, commercial real estate
prices are now starting to firm in prime areas. There were even a number of
substantial property transactions over the last six months, indicating that
prices have reached market-clearing levels. Residential sales volumes also
recovered strongly.
These developments should lend support to stock prices. We expect corporate
profits to grow rapidly over the next two years, at least for the economically
sensitive parts of the market. However, return on equity is unlikely to exceed
8% this cycle, versus the present level of less than 4%. Overall valuations
look reasonable when compared with their historical levels prior to the stock
market bubble of the late 1980s. Stocks are selling at two times book value
and 12 times cash flow, both acceptable if not compelling levels. Finally,
stock valuations are further supported by the low level of bond yields, which
enhances the comparative appeal of stocks. While we expect bond yields to
creep up over the next year as the economy improves, stock valuations should
remain relatively attractive.
PORTFOLIO STRATEGY
Your fund continued to emphasize economically sensitive areas of the market
with growth potential while underweighting interest rate-sensitive and mature
sectors. Our exposure to capital equipment stocks remained at 43% of net
assets. We believe these companies have attractive valuations and good growth
potential as the economy improves. In particular, we still see favorable
prospects for electronic component companies such as Kyocera, housing
companies such as Daiwa House, and machinery stocks like Komori. Our second
biggest exposure, representing 17% of assets, is in service industries because
we expect consumer spending to pick up in coming months. Two of our favorities
here are Marui and Asatsu.
Chart 1 - Industry Diversification
On the other hand, we remain wary about bank stocks, given their lingering
vulnerability to bad debt and their high valuations. Consequently, our
exposure to the finance sector, at 8% of net assets, is relatively low.
During the last six months, we added back some of the technology stocks we had
trimmed last year following strong runs. After enduring a mild correction,
valuations on these stocks now appear more attractive.
Similarly, we added to the fund's telecommunication exposure with further
purchases of the leading mobile telecommunications operator DDI. We continued
to hold about 15% of the fund in the small-company sector, where valuations
are attractive and businesses occupy interesting niches of the economy.
OUTLOOK
The Japanese market has started 1996 reasonably well, and we are optimistic
that further progress can be made over the remainder of the year. The economy
is now improving, helped by very low interest rates, high government
expenditures, and improved sentiment in both the corporate and consumer
worlds. Furthermore, corporate earnings (except for the banks) are now in
their second year of recovery and could improve much further before the peak
of this cycle is reached.
While interest rates at both the short and long ends of the yield curve will
likely rise over the next 12 months, it may not be enough to stall the stock
market's recovery. Valuations remain mixed but are attractive relative to the
bond market. In selected areas, valuations even look compelling when measured
against pre-bubble levels. Finally, and perhaps most important, we can find
stocks that exhibit attractive growth and valuation characteristics relative
to their own histories, as well as against similar companies in other markets
around the world.
Respectfully submitted,
Martin G. Wade
President
May 20, 1996
Revisiting the Case for International Equity Investing
Chart 2 - Correlation of Returns
Over the past 15 years, a growing number of U.S. investors have added
international stocks to their portfolios, mixing domestic and foreign stocks
in the pursuit of higher overall returns with lower volatility. In recent
months, however, some naysayers have questioned the benefits of international
diversification. Some claim that the era of higher international returns is
over, citing the recent superior performance of U.S. stocks. Others point to
short periods when U.S. and international markets moved in tandem, so-called
"high correlation," as proof that foreign stocks no longer offer adequate
diversification.
On the contrary, performance and correlation, when viewed over the long term,
reinforce the case for international diversification. For instance, although
U.S. stocks have recently outperformed, foreign stocks have outpaced them in
seven of the last 12 years. (We used the MSCI Europe, Australia, and Far East
Index - EAFE - to measure foreign stocks and the Standard & Poor's 500 Stock
Index for domestic equities.)
Furthermore, correlations have remained low over the long term. The chart
shows the correlation of various foreign markets to the U.S. over two 10-year
periods. A measurement of 100% would indicate that foreign stocks moved in the
same direction as U.S. stocks all of the time. The overall correlation of
foreign stocks has actually declined: from 1981 through 1990, the EAFE and the
S&P 500 moved in the same direction 41% of the time, but from 1986 through
1995, the correlation dropped to 34%. Correlations declined in the
Netherlands, Germany, and Japan and rose only modestly in the U.K. and Hong
Kong.
Inevitably, there are short periods when foreign markets move with the U.S.
market, usually when the latter is experiencing significant volatility. In
general, however, foreign markets follow their own path depending mostly on
the unique fundamentals of each country. In our opinion, the case for
international diversification remains solid. Foreign stocks may be poised to
regain leadership because many international economies are at earlier stages
of expansion than the U.S. economy. If correlations remain low over the long
term, as we expect, diversifying into foreign stocks could continue to be an
effective way to limit risk and enhance returns.
T. Rowe Price Japan Fund
Portfolio Highlights
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
4/30/96
_____________________________________________________________________________
Kyocera 3.6%
NEC 3.2
Mitsubishi Heavy Industries 3.2
Mitsui Fudosan 2.8
Nomura Securities 2.8
_____________________________________________________________________________
Nippon Denso 2.6
Sankyo 2.4
Sumitomo Electric 2.4
Nippon Steel 2.3
Canon 2.2
_____________________________________________________________________________
Sony 2.1
Sumitomo 2.1
Hitachi 2.1
Matsushita Electric Industrial 2.0
Sharp 2.0
_____________________________________________________________________________
Murata Manufacturing 2.0
Marui 2.0
East Japan Railway 2.0
Ito-Yokado 1.9
TDK 1.8
_____________________________________________________________________________
Daiichi Pharmaceutical 1.7
Toppan Printing 1.7
Sekisui Chemical 1.7
Kuraray 1.6
Teijin 1.6
_____________________________________________________________________________
Total 55.8%
T. Rowe Price Japan Fund
Performance Comparison
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.
Chart 3 - SEC Graph - Japan Fund
Average Annual Compound Total Return
1 3 Since Inception
Periods Ended 4/30/96 Year Years Inception Date
_____________________________________________________________________________
Japan Fund 7.30% 3.63% 5.12% 12/30/91
Investment return and principal value represent past performance and will
vary. Shares may be worth more or less at redemption than at original
purchase.
T. Rowe Price Japan Fund
Unaudited
Financial Highlights For a share outstanding throughout each period
6 Months Year 10 Months# 12/30/91
Ended Ended Ended to
4/30/96 10/31/95 10/31/94 10/31/93 12/31/92
_____________________________________________________________________________
NET ASSET VALUE
Beginning of period $ 9.39 $ 11.64 $ 11.58 $ 8.64 $ 10.00
Investment activities
Net investment income (0.02) (0.04) (0.06)* (0.05)* (0.01)*
Net realized and
unrealized gain (loss) 1.21 (1.40) 0.97 2.99 (1.35)
Total from
investment activities 1.19 (1.44) 0.91 2.94 (1.36)
Distributions
Net realized gain - (0.81) (0.85) - -
NET ASSET VALUE
End of period $ 10.58 $ 9.39 $ 11.64 $ 11.58 $ 8.64
Ratios/Supplemental Data
Total return 12.7% (12.9)% 9.3%* 33.7%* (13.4)%*
Ratio of expenses to
average net assets 1.36%! 1.50% 1.50%* 1.50%*! 1.50%*
Ratio of net investment
income to average
net assets (0.36)%! (0.48)% (0.68)%* (0.58)%*! (0.22)%*
Portfolio turnover rate 29.7%! 62.4% 61.5% 61.4%! 41.6%
Average commission
rate paid $ 0.0540 - - - -
Net assets,
end of period
(in thousands) $228,788 $ 181,383 $203,303 $ 87,163 $45,792
* Excludes expenses in excess of a 1.50% voluntary expense limitation in
effect through 10/31/95.
! Annualized.
# The fund's fiscal year-end was changed to 10/31.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Japan Fund
Unaudited April 30, 1996
Statement of Net Assets Shares/Par Value
In thousands
JAPAN 95.2%
Common Stocks & Warrants 95.2%
Amada 296,000 $ 3,452
Amway Japan 10,000 515
Apollo Electronics 21,000 438
Asatsu 7,200 317
Avon Products 34,000 169
Canon 253,000 5,031
Canon Sales 6,000 168
Chofu Seisakusho 16,000 418
Citizen Watch 165,000 1,443
Daibiru 39,000 526
Daifuku 70,000 1,104
Daiichi Pharmaceutical 235,000 3,954
DaiNippon Screen Manufacturing 212,000 2,148
Daiwa House 228,000 3,640
DDI 433 3,721
Diamond City 8,000 72
Disco 7,000 233
East Japan Railway 844 4,510
Eidensha 8,000 108
Emoto Industry 4,000 44
Enix 13,000 378
Enplas 2,000 47
Fanuc 79,000 3,436
FCC 9,900 369
Glory 12,000 430
Hamada Printing Press 40,000 285
Hirose Electric 5,700 352
Hitachi 437,000 4,721
Hitachi Tool Engineering 28,000 225
Hitachi Zosen 585,000 3,210
Homac 21,000 466
Home Wide 4,000 52
Honda Motor 57,000 1,302
Horiba 18,000 256
Idec Izumi 45,000 447
Inax 171,000 $ 1,864
Ito-Yokado 72,000 4,247
Iwata Air Compressor Manufacturing 64,000 404
Japan Airport Terminal 42,000 606
Japan Living Service 28,000 253
Juel Verite Ohkubo 20,000 189
Juel Verite Ohkubo,
warrants, exp. 3/10/98 (CHF) * 40 11
Juken Sangyo 42,000 490
Kansai Sekiwa Real Estate 11,000 193
Kato Denki 12,600 278
Keyence 8,100 1,069
Kirin Beverage 25,000 354
KOA 16,000 257
Komatsu 322,000 3,109
Komori 117,000 3,109
KTK Telecommunications Engineering 15,000 168
Kumagai Gumi 311,000 1,335
Kuraray 326,000 3,771
Kyocera 108,000 8,136
Kyokuto Kaihatsu Kogyo 9,200 210
Levi Strauss Japan Kabushiki Kaisha 2,000 41
Lintec 9,000 158
Mabuchi Motor 9,100 560
Marui 205,000 4,527
Masaru 7,000 57
Matsumotokiyoshi 12,000 384
Matsushita Electric Industrial 260,000 4,598
Meitec 15,000 331
Meitetsu Transport 38,000 231
Meitetsu Transport,
warrants, exp. 4/30/97 (CHF) * 1,500 81
Mitsubishi 130,000 1,852
Mitsubishi Heavy Industries 816,000 7,286
Mitsui Fudosan 493,000 6,504
Mitsui Petrochemical Industries 136,000 1,148
Mori Seiki 12,000 274
Mos Food Services 12,100 312
Murata Manufacturing 117,000 4,541
Namura Shipbuilding 13,000 $ 79
National House Industrial 71,000 1,256
NEC 584,000 7,425
New Japan Securities * 32,000 222
Nichicon 50,000 832
Nichiei 5,000 335
Nihon Dempa Kogyo 3,000 71
Nippon Denso 271,000 5,907
Nippon Denwa Shisetsu 40,000 377
Nippon Hodo 87,000 1,547
Nippon Kagaku Yakin 11,000 120
Nippon Konpo Unyu Soko 27,000 244
Nippon Seiki 25,000 380
Nippon Steel 1,436,000 5,189
Nippon Telephone & Telecom 408 3,163
Nippon Yusoki 26,000 163
Nishio Rent All 7,000 177
Nissha Printing 6,000 95
Nitta 22,000 387
Nomura Securities 297,000 6,473
Okasan Securities * 20,000 124
Osaka Organic Chemical 13,000 190
Paltac 24,000 395
Pioneer Electronic 158,000 3,534
Promise 7,800 332
Rinnai 11,700 293
Ryoyo Electro 27,000 694
Sanken Electric 17,000 154
Sankyo 227,000 5,512
Sankyo Engineering * 11,000 172
Sansei Yusoki 27,000 354
Santen Pharmaceutical 16,900 393
Sega Enterprises 49,000 2,501
Seiko 14,000 344
Sekisui Chemical 307,000 3,874
Sekisui House 235,000 2,921
Senshukai 11,000 183
Sharp 262,000 $ 4,558
Shimachu 9,000 305
Shin-Etsu Chemical 164,850 3,609
Shinkawa 10,125 285
Sintokogio 36,000 327
Sodick * 40,000 512
Sogo Denki 44,000 252
Sony 75,400 4,901
Sony Music Entertainment 4,000 217
Sumitomo 399,000 4,768
Sumitomo Electric 375,000 5,377
Sumitomo Forestry 182,000 2,801
Tamura 20,000 138
TDK 73,000 4,180
Techno Ryowa 11,000 221
Teijin 679,000 3,732
Toc 51,000 590
Tokai Rubber Industries 37,000 478
Tokio Marine & Fire Insurance 188,000 2,588
Tokyo Electronics 50,000 1,859
Tokyo Steel Manufacturing 137,000 2,763
Toppan Printing 266,000 3,916
Toshiba Tungaloy * 19,000 123
Toyo Communication Equipment 4,000 86
Trusco Nakayama 7,200 181
Tsuchiya Home 13,000 255
Uniden 7,000 154
Wakita 13,000 234
Wako Securities 30,000 278
Xebio 5,600 209
Yamatane Securities * 27,000 133
Yamato Kogyo 24,000 275
Zuiko 7,000 163
_____________________________________________________________________________
Total Japan (Cost $206,233) 217,805
SHORT-TERM INVESTMENTS 3.1%
Commercial Paper 2.7%
Asset Securitization Cooperative, 4(2),
5.30%, 6/10/96 $1,000,000 $ 994
BNP Canada, 5.30%, 6/3/96 1,700,000 1,685
Delaware Funding, 4(2), 5.30%, 7/23/96 1,000,000 987
Tasmanian Public Finance, 5.27%, 9/23/96 1,000,000 975
Investments in Commercial Paper
through a joint account,
5.36 - 5.37%, 5/1/96 1,490,918 1,491
_____________________________________________________________________________
6,132
Certificate of Deposit 0.4%
Bank One Milwaukee, 5.32%, 6/7/96 1,000
_____________________________________________________________________________
1,000
_____________________________________________________________________________
Total Short-Term Investments (Cost $7,132) 7,132
Total Investments in Securities
98.3% of Net Assets (Cost $213,365) $ 224,937
Other Assets Less Liabilities 3,851
NET ASSETS $ 228,788
Net Assets Consist of:
Accumulated net investment income -
net of distributions $ (365)
Accumulated net realized gain/loss -
net of distributions (3,576)
Net unrealized gain (loss) 11,583
Paid-in-capital applicable to 21,615,717 shares
of $0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized 221,146
NET ASSETS $ 228,788
NET ASSET VALUE PER SHARE $ 10.58
* Non-income producing
CHF Swiss franc
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.
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Japan Fund
Unaudited
Statement of Operations
In thousands
6 Months
Ended
4/30/96
Investment Income
Income
Dividend (net of foreign taxes of $ 126) $ 714
Interest 289
Total income 1,003
Expenses
Investment management 902
Shareholder servicing 286
Custody and accounting 100
Registration 37
Prospectus and shareholder reports 18
Legal and audit 15
Directors 4
Miscellaneous 6
Total expenses 1,368
Net investment income (365)
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (804)
Foreign currency transactions (55)
Net realized gain (loss) (859)
Change in net unrealized gain or loss
Securities 25,119
Other assets and liabilities
denominated in foreign currencies 20
Change in net unrealized gain or loss 25,139
Net realized and unrealized gain (loss) 24,280
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ 23,915
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Japan Fund
Unaudited
Statement of Changes in Net Assets
In thousands
6 Months Year
Ended Ended
4/30/96 10/31/95
Increase (Decrease) in Net Assets
Operations
Net investment income $ (365) $ (762)
Net realized gain (loss) (859) (2,708)
Change in net unrealized gain or loss 25,139 (22,047)
Increase (decrease) in net assets
from operations 23,915 (25,517)
Distributions to shareholders
Net realized gain - (12,421)
Capital share transactions*
Shares sold 96,482 179,849
Distributions reinvested - 11,938
Shares redeemed (72,992) (175,769)
Increase (decrease) in net assets from
capital share transactions 23,490 16,018
Net Assets
Increase (decrease) during period 47,405 (21,920)
Beginning of period 181,383 203,303
End of period $ 228,788 $ 181,383
*Share information
Shares sold 9,771 18,735
Distributions reinvested - 1,180
Shares redeemed (7,468) (18,062)
Increase (decrease) in shares outstanding 2,303 1,853
The accompanying notes are an integral part of these financial statements.
T. Rowe Price Japan Fund
Unaudited April 30, 1996
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 Japan Fund (the fund), a diversified,
open-end management investment company, is one of the portfolios established
by the Corporation and commenced operations on December 30, 1991.
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.
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.
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.
Securities Lending
To earn additional income, the fund lends its securities to approved brokers.
At April 30, 1996, the market value of securities on loan was $19,398,000,
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.
Other
Purchases and sales of portfolio securities, other than short-term securities,
aggregated $46,348,000 and $28,763,000, respectively, for the six months ended
April 30, 1996.
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.
At April 30, 1996, the aggregate cost of investments for federal income tax
and financial reporting purposes was $213,365,000 and net unrealized gain
aggregated $11,572,000, of which $16,754,000 related to appreciated
investments and $5,182,000 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 $145,000 was payable at
April 30, 1996. 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 April 30, 1996, and for the six months 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.
Under the terms of the investment management agreement, the Manager was
required to bear any expenses through December 31, 1993 which would cause the
fund's ratio of expenses to average net assets to exceed 1.50%. Thereafter,
through December 31, 1995, the fund was required to reimburse the Manager for
these expenses, provided that average net assets had grown or expenses had
declined sufficiently to allow reimbursement without causing the fund's ratio
of expenses to average net assets to exceed 1.50%. Pursuant to this agreement,
$65,000 of unaccrued 1993 fees were repaid during the six months ended April
30, 1996, and $82,000 of unaccrued fees were permanently waived at December
31, 1995.
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 $266,000 for
the six months ended April 30, 1996, of which $56,000 was payable at
period-end.
During the six months ended April 30, 1996, the fund, in the ordinary course
of business, paid commissions of $67,000 to, and placed security purchase and
sale orders aggregating $18,786,000 with, certain affiliates of the Manager in
connection with the execution of various portfolio transactions.
T. Rowe Price 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 1-800-225-5132 Available Monday through Friday from 8 a.m. to 10
p.m. and weekends from 8:30 a.m. to 5 p.m.
In Person Available in T. Rowe Price Investor Centers.
Account Services
Checking Available on most fixed income funds.
Automatic Investing From your bank account or paycheck.
Automatic Withdrawal Scheduled, automatic redemptions.
Distribution Options Reinvest all, some, or none of your distributions.
Automated 24-Hour Services Including Tele*Access(registered trademark) and
PC*Access(registered trademark).
Discount Brokerage
Individual Investments Stocks, bonds, options, precious metals, and other
securities; potentially large savings on commissions.
Investment Information
Combined Statement An overview of your T. Rowe Price accounts.
Shareholder Reports Fund managers' reviews of their strategies and results.
The T. Rowe Price Report A quarterly investment newsletter discussing markets
and financial strategies.
Performance Update Quarterly review of all T. Rowe Price fund results.
Insights Educational reports on investment strategies and financial markets.
Investment Guides Asset Mix Worksheet, College Planning Kit, Personal
Strategy Planner, Retirees Financial Guide, and Retirement Planning Kit.
T. Rowe Price Mutual Funds
Stock Funds
Domestic
Balanced
Blue Chip Growth
Capital Appreciation
Capital Opportunity
Dividend Growth
Equity Income
Equity Index
Growth & Income
Growth Stock
Health Sciences
Mid-Cap Growth
New America Growth
New Era
New Horizons
OTC
Science & Technology
Small-Cap Value
Spectrum Growth
Value
International/Global
Emerging Markets Stock
European Stock
Global Stock
International Discovery
International Stock
Japan
Latin America
New Asia
Bond Funds
Domestic Taxable
Corporate Income
GNMA
High Yield
New Income
Short-Term Bond
Short-Term U.S. Government
Spectrum Income
Summit GNMA
Summit Limited-Term Bond
U.S. Treasury Intermediate
U.S. Treasury Long-Term
Domestic Tax-Free
California Tax-Free Bond
Florida Insured Intermediate Tax-Free
Georgia Tax-Free Bond
Maryland Short-Term Tax-Free Bond
Maryland Tax-Free Bond
New Jersey Tax-Free Bond
New York Tax-Free Bond
Summit Municipal Income
Summit Municipal Intermediate
Tax-Free High Yield
Tax-Free Income
Tax-Free Insured
Intermediate Bond
Tax-Free Short-Intermediate
Virginia Short-Term
Tax-Free Bond
Virginia Tax-Free Bond
International/Global
Global Government Bond
Emerging Markets Bond
International Bond
Short-Term Global Income
Money Market
Taxable
Prime Reserve
Summit Cash Reserves
U.S. Treasury Money
Tax-Free
California Tax-Free Money
New York Tax-Free Money
Summit Municipal Money Market
Tax-Exempt Money
Blended Asset
Personal Strategy Balanced
Personal Strategy Growth
Personal Strategy Income
T. Rowe Price No-Load Variable Annuity
Equity Income Portfolio
International Stock Portfolio
Limited-Term Bond Portfolio
New America Growth Portfolio
Personal Strategy Balanced Portfolio
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.
Invest With Confidence(registered trademark)
T. Rowe Price
T. Rowe Price Investment Services, Inc., Distributor REPTJAF 4/30/96
Chart 1 - Industry Diversification - A pie chart showing industry
diversification as of 4/30/96; Capital Equipment 43%; Services 17%; Consumer
Goods 14%; Materials 12%; Finance 8%; Multi-Industry 1%; Other and Reserves
5%. Based on net assets as of 4/30/96.
Chart 2 - Correlation of Returns - a bar chart showing the correlation of
total returns of various international countries with the US stock market from
1981-1990 and from 1986-1995.
Footnote: Percentage of time that foreign markets moved in the same direction
as the U.S. market. Sources: Morgan Stanley Capital International indexes,
Standard & Poor's 500 Stock Index, and Frank Russell Company.
Chart 3 - SEC Graph - Japan Fund - a two-line graph showing performance of a
$10,000 investment in the Japan Fund and the TSE First Section Index from
12/30/91 through 4/30/96.
