<PAGE>
Semiannual Report
JAPAN
FUND
--------------
April 30, 1997
--------------
[LOGO OF T. ROWE PRICE APPEARS HERE]
<PAGE>
REPORT HIGHLIGHTS
-----------------------------------------------------------------------------
. The Japanese market suffered steep losses, with declines in local markets
exacerbated for U.S. investors by the strength of the dollar.
. Investors were dismayed by the banking sector's continued woes and the
negative implications of deregulation for domestic industries.
. The Japan Fund posted a loss of 6.32% over the last six months, not as steep
as the declines in the overall Japanese market and the Lipper average for
similar funds.
. The fund focused on world-class, export-oriented companies whose products
were more competitive as the yen weakened.
. The increasing emphasis on shareholder value, and the move toward linking
management's success with that of the stock, are signs that the long bear
market may be coming to an end.
<PAGE>
FELLOW SHAREHOLDERS
The miserable performance of the Japanese market continued into the first part
of 1997. Declines in the local markets were exacerbated by the weakness of the
yen against a resurgent greenback, further curtailing returns to U.S. investors.
Large stocks, as represented by the TSE First Section Index, fared better than
their smaller counterparts in the Second Section Index, but both produced steep
losses over the last six and 12 months.
-----------------------
PERFORMANCE COMPARISON
-------------------------------------------------------
<TABLE>
<CAPTION>
Periods Ended 4/30/97 6 Months 12 Months
------------------------------------------------------
<S> <C> <C>
Japan Fund -6.32% -20.13%
......................................................
TSE First Section Index -16.69 -30.53
......................................................
TSE Second Section Index -26.51 -38.28
......................................................
Lipper Japan Funds Average -7.44 -20.74
......................................................
</TABLE>
While suffering losses on an absolute basis, your fund did not fall
as steeply as the overall market indices and also outperformed the
Lipper average of similar funds. This was true for both the 6- and
12-month periods ended April 30. Our focus on export-oriented
manufacturing companies, the strongest area of the market, helped
limit the damage to your portfolio. These companies represent more
than half of fund assets, a weighting more than double that of the
TSE First Section Index. The fund was also helped by its low exposure
to domestic-oriented companies, particularly the banks.
MARKET REVIEW
The economy, having rebounded from a long recession to become one of
the fastest growing of the major industrialized countries, is clearly
no longer the cause of the stock market's woes. The culprits now are
the continued worries about the financial system, the increasing pace
of deregulation, which is hurting the prospects of many domestic
industries, and an overall environment of corporate earnings
downgrades. The mood in the stock market is one of depression, with
many domestic investors having apparently lost hope for a recovery.
Ironically, the economy is not in bad shape. In the final quarter of
1996, real gross domestic product grew at an annualized rate of 2.9%.
Industrial production is improving, with inventories falling while
1
<PAGE>
shipments are increasing. The problem, however, is that much of the
growth is export-related while domestic business conditions remain in
the doldrums, creating a two-tiered economy.
With the yen losing about half its value against the dollar over the
last two years, Japanese exports are again very competitive. In the
12 months through February, for example, exports were up 10% and the
trade surplus expanded in yen terms for the first time since 1994.
Automobile companies are regaining market share in the U.S. and
Europe, and the electronics industry is benefiting from the increased
sale of key components to the personal computer and
telecommunications industries. The weak yen has also helped improve
the competitiveness of Japanese factories, slowing their relocation
to overseas bases. It is likely that this picture will lead to
renewed trade friction going forward.
. . . JAPANESE EXPORTS ARE AGAIN VERY COMPETITIVE.
The domestic economy is far less robust. Having led the economy out
of recession, housing starts are now retreating, falling 1.5% in the
year through February. General construction orders remain weak.
Despite improving employment prospects and higher winter bonuses,
consumer spending is still anemic with savings rates at record highs.
While the sheer volume of sales is growing, fierce competition is
keeping prices flat. A case in point: consumer electronics retailers
have seen aggregate volumes rise about 7% over the last year, but
there has been little change in the value of sales. The competition
among retailers remains savage, with many regional chains invading
each other's territories.
On the positive side, the stagnant prices, coupled with the falling
yen, mean that many products in Japan are no longer expensive by
international standards. It is now cheaper to buy a Big Mac in Tokyo
than New York, and a room in a quality hotel is much cheaper. This
should attract foreigners and help the domestic economy over the
medium term. Despite the improving economy, the local bond market
continued to march to new highs, bringing the yield on 10-year issues
down to 2.2%. Surely, Japan's long-term inflation prospects are not
that benign, particularly after the recent weakness of the currency.
At the industry level, the most interesting news over the last six
months was the renewed interest in real estate. Several large plots
of land were sold in central Tokyo for prices that imply a 6% gross
rental yield with prices having fallen by 80% from their 1990 peak.
Most important, overseas buyers were active in the auctions, offering
evidence that prices have fallen to realistic levels by international
standards. Office rents in Tokyo are now cheaper than in Hong Kong or
Singapore. In the long
2
<PAGE>
run, these developments should help the financial system, but in the
near term rumors continue to swirl around the perilous health of the
banking sector. Despite all the talk of a financial sector "Big
Bang," Japanese authorities seem unwilling to abandon the "convoy"
system where the stronger banks absorb the problems of the weaker,
thus prolonging the pain for everyone. At times, it seems that the
authorities do not grasp the seriousness of the problem.
PORTFOLIO STRATEGY
Over the last six months, performance in the market diverged sharply.
The top performers were a small number of export-oriented
manufacturers. Fortunately, your fund is concentrated in this area,
with major holdings in such well-known companies as NEC, Sony,
Kyocera, TDK, Canon, and Murata Manufacturing. Paradoxically, these
companies, which represent the best-managed and fastest-growing in
the country, have traded at a discount to the overall Japanese market
for most of the last decade. However, in the last year, the weak yen
has prodded foreign and local institutional investors to rediscover
the attraction of these stocks, leading to rising valuations and
positive contributions to your portfolio.
------------------------
INDUSTRY DIVERSIFICATION
------------------------------------------------
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Consumer Goods 17%
Services 16%
Materials 13%
Finance 7%
Capital Equipment 38%
Other and Reserves 9%
Based on net assets as of 4/30/97.
</TABLE>
Conversely, the bottom rung of the performance ladder was crowded
with banks, construction firms, and other nonmanufacturing companies
that fell further out of favor. Investors grew steadily colder toward
these companies because of their weak balance sheets and the prospect
of declining profitability in coming months due to widespread
deregulation. Your fund continues to have minimal exposure to them;
for example, we own no banks, and the recent weakness in these stocks
has not persuaded us to jump in. Our 7% exposure to the finance
sector (shown in the pie chart) is focused primarily on brokerage and
insurance companies.
Among our poor performers were companies involved in the house
building industry. Holdings in Daiwa House and Sekisui House
3
<PAGE>
underperformed the market over the last six months despite reasonable
growth and cheap valuations because investors were concerned about
the impact of potentially rising interest rates on these companies.
As always, your fund sought to reduce risk by maintaining a widely
diversified portfolio. Our largest stake, representing 38% of fund
assets, remained in the capital equipment category, primarily in
world-class competitors that benefit from the weakness of the yen.
Our second-largest position was in consumer goods companies with a
focus on well-managed firms such as Marui and Uny that are steadily
expanding their businesses despite the parsimony of Japanese
consumers.
OUTLOOK
The Japanese market was disappointing once again. Despite reasonable
signs from the economy, investors have preferred to focus on the
problems of the domestic sectors of the market. Looking forward, we
are increasingly optimistic that the worst of the long bear market
may be over. The expansion of the economy should continue into 1998.
The low yields of the bond market provide strong support for the
equity market at present, and this will not change significantly even
if the bond market weakens over the next 12 months.
Valuations are attractive, at least selectively, with many companies
now trading at price/book value, price/cash flow, and even
price/earnings multiples that are in line with or cheaper than
international standards. Most important, both the government and
corporate managements are becoming increasingly convinced that
shareholder interests must carry more weight in how companies are
run. This focus on shareholder value, the greater alignment of
managements' interests with those of their companies, and a renewed
focus on meeting financial targets are the most encouraging signs
that the long underperformance of the Japanese market may be coming
to an end.
Respectfully submitted,
/s/ Martin G. Wade
Martin G. Wade
President
May 19, 1997
4
<PAGE>
T. ROWE PRICE JAPAN FUND
- -------------------------------------------------------------------------------
- --------------------
PORTFOLIO HIGHLIGHTS
- -------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
4/30/97
----------------------------------------------------------------
<S> <C>
NEC 3.4%
................................................................
Denso 2.9
................................................................
Sony 2.9
................................................................
Mitsui Fudosan 2.9
................................................................
Sankyo 2.8
----------------------------------------------------------------
Kyocera 2.8
................................................................
TDK 2.8
................................................................
Mitsubishi Heavy Industries 2.7
................................................................
Canon 2.7
................................................................
Sumitomo Electric Industries 2.6
----------------------------------------------------------------
Marui 2.3
................................................................
Murata Manufacturing 2.3
................................................................
Matsushita Electric Industrial 2.1
................................................................
East Japan Railway 2.0
................................................................
Hitachi 2.0
----------------------------------------------------------------
Sharp 2.0
................................................................
Nippon Steel 2.0
................................................................
Toppan Printing 1.9
................................................................
Daiichi Pharmaceutical 1.9
................................................................
Shin-Etsu Chemical 1.8
----------------------------------------------------------------
Sekisui Chemical 1.8
................................................................
Teijin 1.7
................................................................
Nomura Securities 1.7
................................................................
Nippon Telephone & Telecom 1.7
................................................................
Ito-Yokado 1.6
----------------------------------------------------------------
Total 57.3%
</TABLE>
5
<PAGE>
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.
<TABLE>
<CAPTION>
JAPAN FUND
---------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
TSE First Section Index Lipper Japan Funds Average Japan Fund
<S> <C> <C> <C>
12/30/91 10,000 10,000 10,000
Apr-92 7,199 7,995 8,860
Apr-93 10,609 10,777 11,160
Apr-94 11,501 11,930 12,434
Apr-95 11,540 11,358 11,576
Apr-96 11,903 12,296 12,421
Apr-97 8,269 9,136 9,920
</TABLE>
- ------------------------------------
AVERAGE ANNUAL COMPOUND TOTAL RETURN
- --------------------------------------------------------------------------------
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.
<TABLE>
<CAPTION>
Since Inception
Periods Ended 4/30/97 1 Year 3 Years 5 Years Inception Date
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Japan Fund -20.13% -7.25% 2.29% -0.15% 12/30/91
.........................................................................................
</TABLE>
Investment return and principal value represent past performance and
will vary. Shares may be worth more or less at redemption than at
original purchase.
6
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
Unaudited
- --------------------
FINANCIAL HIGHLIGHTS For a share outstanding throughout each period
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
6 Months Year 10 Months++ 12/30/91
Ended Ended Ended to
4/30/97 10/31/96 10/31/95 10/31/94 10/31/93 12/31/92
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period $ 9.02 $ 9.39 $ 11.64 $ 11.58 $ 8.64 $ 10.00
..................................................................................
Investment activities
Net investment income (0.01) (0.05) (0.04) (0.06)* (0.05)* (0.01)*
Net realized and
unrealized gain (loss) (0.56) (0.32) (1.40) 0.97 2.99 (1.35)
..................................................................................
Total from
investment activities (0.57) (0.37) (1.44) 0.91 2.94 (1.36)
..................................................................................
Distributions
Net realized gain -- -- (0.81) (0.85) -- --
..................................................................................
NET ASSET VALUE
End of period $ 8.45 $ 9.02 $ 9.39 $ 11.64 $ 11.58 $ 8.64
----------------------------------------------------------------------------------
Ratios/Supplemental Data
Total return (6.32)% (3.94)% (12.87)% 9.25%* 33.72%* (13.40)%*
..............................................................................................................
Ratio of expenses to
average net assets 1.29%+ 1.32% 1.50% 1.50%* 1.50%*+ 1.50%*
..............................................................................................................
Ratio of net investment
income to average
net assets (0.33)%+ (0.48)% (0.48)% (0.68)%* (0.58)%*+ (0.22)%*
..............................................................................................................
Portfolio turnover rate 25.1%+ 29.8% 62.4% 61.5% 61.4%+ 41.6%
..............................................................................................................
Average commission
rate paid $ 0.0521 $ 0.0540 $ -- $ -- $ -- $ --
..............................................................................................................
Net assets, end of period
(in thousands) $ 158,074 $ 167,118 $ 181,383 $ 203,303 $ 87,163 $ 45,792
..............................................................................................................
</TABLE>
* Excludes expenses in excess of a 1.50% voluntary expense limitation in effect
through 10/31/95.
+ Annualized.
++ The funds fiscal year-end was changed to 10/31.
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
Unaudited April 30, 1997
<TABLE>
<CAPTION>
- -----------------------
STATEMENT OF NET ASSETS Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
JAPAN 90.6%
<S> <C> <C>
Common Stocks 90.6%
Aim Services 7,000 $ 85
........................................................................
Amada 172,000 1,286
........................................................................
Amway Japan 4,600 140
........................................................................
Apollo Electronics 21,000 215
........................................................................
Asatsu 2,700 77
........................................................................
Canon 177,000 4,197
........................................................................
Cesar 26,000 96
........................................................................
Chofu Seisakusho 17,600 277
........................................................................
Circle K Japan 8,660 398
........................................................................
Citizen Watch 103,000 741
........................................................................
DDI 363 2,411
........................................................................
Daibiru 10,000 110
........................................................................
Daifuku 62,000 713
........................................................................
Daiichi Pharmaceutical 189,000 3,037
........................................................................
DaiNippon Screen Manufacturing 153,000 1,217
........................................................................
Daiwa House 175,000 1,958
........................................................................
Denso 204,000 4,645
........................................................................
Disco 14,000 307
........................................................................
East Japan Railway 744 3,218
........................................................................
FCC 11,500 315
........................................................................
Fanuc 46,300 1,579
........................................................................
Fuji Machine 14,000 395
........................................................................
Fujimi 1,760 93
........................................................................
Fuso Lexel 9,000 64
........................................................................
Glory 4,000 73
........................................................................
Hamada Printing Press 40,000 189
........................................................................
Higashi Nihon House 13,000 128
........................................................................
Hirose Electric 9,300 508
........................................................................
Hitachi 353,000 3,198
........................................................................
Hitachi Zosen 329,000 1,143
........................................................................
Homac 8,500 96
........................................................................
Honda Motor 29,000 900
........................................................................
Horiba 16,000 150
........................................................................
Idec Izumi 10,000 73
........................................................................
Inax 132,000 819
........................................................................
</TABLE>
8
<PAGE>
T. ROWE PRICE JAPAN FUND
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Ito-Yokado 52,000 $ 2,495
.........................................................................
Japan Airport Terminal 23,000 236
........................................................................
Japan Living Service 28,000 143
........................................................................
Juel Verite Ohkubo 20,000 114
........................................................................
Juken Sangyo 22,000 123
........................................................................
Juntendo 32,000 166
........................................................................
KOA 27,000 300
........................................................................
KTK Telecommunications Engineering 33,000 239
........................................................................
Kanamoto 25,000 174
........................................................................
Kansai Sekiwa Real Estate 10,000 73
........................................................................
Kao 125,000 1,457
........................................................................
Karakami Kankoh 7,000 111
........................................................................
Kawasumi Laboratories 10,000 114
........................................................................
Keyence 5,220 637
........................................................................
Kirin Beverage 17,000 232
........................................................................
Komatsu 202,000 1,477
........................................................................
Komori 79,000 1,687
........................................................................
Kumagai Gumi 228,000 305
........................................................................
Kuraray 252,000 2,224
........................................................................
Kyocera 74,000 4,431
........................................................................
Lasertec 7,000 209
........................................................................
Mabuchi Motor 6,500 329
........................................................................
Marui 221,000 3,639
........................................................................
Marukyo 18,000 180
........................................................................
Maruzen 20,000 116
........................................................................
Masaru 7,000 40
........................................................................
Matsumotokiyoshi 2,400 75
........................................................................
Matsushita Electric Industrial 208,000 3,326
........................................................................
Meitec 6,000 120
........................................................................
Meitetsu Transport 36,000 126
........................................................................
Mitsubishi 159,000 1,491
........................................................................
Mitsubishi Heavy Industries 653,000 4,311
........................................................................
Mitsui Fudosan 396,000 4,524
........................................................................
Mitsui Petrochemical Industries 120,000 564
........................................................................
Mos Food Services 13,200 179
........................................................................
Murata Manufacturing 98,000 3,613
........................................................................
NEC 440,000 5,373
........................................................................
</TABLE>
9
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
National House Industrial 62,000 $ 733
.........................................................................
Nichicon 29,000 318
.........................................................................
Nichiei 7,500 603
.........................................................................
Nidec 5,390 230
.........................................................................
Nippon Denwa Shisetsu 31,500 236
.........................................................................
Nippon Hodo 65,000 459
.........................................................................
Nippon Kagaku Yakin 5,000 22
.........................................................................
Nippon Konpo Unyu Soko 13,000 76
.........................................................................
Nippon Steel 1,099,000 3,134
.........................................................................
Nippon Telephone & Telecom 384 2,708
.........................................................................
Nishio Rent All 15,000 170
.........................................................................
Nitta 11,000 125
.........................................................................
Nomura Securities 244,000 2,730
.........................................................................
Noritsu Koki 10,800 460
.........................................................................
Paltac 13,000 81
.........................................................................
Paris Miki 5,750 170
.........................................................................
Pioneer Electronic 99,000 1,770
.........................................................................
Promise 7,800 323
.........................................................................
Rinnai 7,700 140
.........................................................................
Rohto Pharmaceutical * 40,000 381
.........................................................................
Royal Limited 15,730 228
.........................................................................
Ryoyo Electro 13,000 208
.........................................................................
Sankyo 167,000 4,473
.........................................................................
Sansei Yusoki 10,000 69
.........................................................................
Santen Pharmaceutical 27,500 490
.........................................................................
Sega Enterprises 40,000 1,053
.........................................................................
Seiko 14,000 192
.........................................................................
Sekisui Chemical 297,000 2,855
.........................................................................
Sekisui House 187,000 1,665
.........................................................................
Sharp 245,000 3,185
.........................................................................
Shin-Etsu Chemical 143,000 2,884
.........................................................................
Shinkawa 12,600 251
.........................................................................
Shiseido 60,000 860
.........................................................................
Sintokogio 18,000 115
.........................................................................
Sodick * 27,000 238
.........................................................................
Sokkia 14,000 76
.........................................................................
Sony 63,200 4,601
.........................................................................
</TABLE>
10
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Sumitomo 323,000 $ 2,173
.........................................................................
Sumitomo Electric Industries 305,000 4,133
.........................................................................
Sumitomo Forestry 169,000 1,718
.........................................................................
TDK 61,000 4,397
.........................................................................
Tachihi Enterprise 4,000 97
.........................................................................
Techno Ryowa 11,000 117
.........................................................................
Teijin 683,000 2,760
.........................................................................
Toa Medical Electronics 14,000 206
.........................................................................
Toc 25,000 234
.........................................................................
Tokio Marine & Fire Insurance 174,000 1,700
.........................................................................
Tokyo Electronics 45,100 1,741
.........................................................................
Tokyo Steel Manufacturing 103,700 1,111
.........................................................................
Tokyo Tanabe 43,000 285
.........................................................................
Toppan Printing 237,000 3,062
.........................................................................
Tsuchiya Home 14,000 122
.........................................................................
Uny 45,000 791
.........................................................................
Ushio 13,000 153
.........................................................................
Xebio 5,600 131
.........................................................................
Zuiko 13,000 149
.........................................................................
Total Japan (Cost $163,242) 143,196
...............
SHORT-TERM INVESTMENTS 8.0%
Commercial Paper 8.0%
Canadian Imperial Bank Commerce,
5.53%, 5/23/97 $ 5,000,000 5,000
.........................................................................
Investments in Commercial Paper
through a Joint Account,
5.60%, 5/1/97 7,710,713 7,710
.........................................................................
Total Short-Term Investments
(Cost $12,710) 12,710
...............
</TABLE>
11
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
<S> <C> <C>
Total Investments in Securities
98.6% of Net Assets (Cost $175,952) $ 155,906
Other Assets Less Liabilities 2,168
...............
NET ASSETS $ 158,074
===============
Net Assets Consist of:
Accumulated net investment income - net of distributions $ (241)
Accumulated net realized gain/loss - net of distributions (11,342)
Net unrealized gain (loss) (20,056)
Paid-in-capital applicable to 18,715,482 shares of $0.01 par
value capital stock outstanding; 2,000,000,000 shares of the
...............
Corporation authorized 189,713
...............
NET ASSETS $ 158,074
===============
NET ASSET VALUE PER SHARE $ 8.45
===============
</TABLE>
* Non-income producing
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
- -------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
In thousands
6 Months
Ended
4/30/97
Investment Income
<S> <C>
Income
Dividend (net of foreign taxes of $95) $ 538
Interest 162
...............
Total income 700
...............
Expenses
Investment management 606
Shareholder servicing 213
Custody and accounting 82
Registration 19
Prospectus and shareholder reports 7
Legal and audit 6
Directors 4
Miscellaneous 4
...............
Total expenses 941
...............
Net investment income (241)
...............
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities (6,440)
Foreign currency transactions (135)
...............
Net realized gain (loss) (6,575)
...............
Change in net unrealized gain or loss
Securities (1,913)
Other assets and liabilities
denominated in foreign currencies 5
...............
Change in net unrealized gain or loss (1,908)
...............
Net realized and unrealized gain (loss) (8,483)
...............
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (8,724)
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
T. ROWE PRICE JAPAN FUND
- --------------------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
- ----------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
In thousands
6 Months Year
Ended Ended
4/30/97 10/31/96
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations
Net investment income $ (241) $ (950)
Net realized gain (loss) (6,575) (2,174)
Change in net unrealized gain or loss (1,908) (4,592)
...............................
Increase (decrease) in net assets from operations (8,724) (7,716)
...............................
Capital share transactions *
Shares sold 64,978 139,855
Shares redeemed (65,298) (146,404)
...............................
Increase (decrease) in net assets from capital
share transactions (320) (6,549)
...............................
Net Assets
Increase (decrease) during period (9,044) (14,265)
Beginning of period 167,118 181,383
...............................
End of period $ 158,074 $ 167,118
===============================
*Share information
Shares sold 7,757 14,194
Shares redeemed (7,571) (14,979)
...............................
Increase (decrease) in shares outstanding 186 (785)
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
T. ROWE PRICE JAPAN FUND
- -------------------------------------------------------------------------------
Unaudited April 30, 1997
-------------------------------
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 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.
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.
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.
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T. ROWE PRICE JAPAN FUND
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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 The fund lends its securities to approved brokers to
earn additional income and takes cash and U.S. Treasury securities as
collateral to secure the loans. Collateral is maintained at not less than
100% of the value of loaned securities. At April 30, 1997, the value of
securities on loan was $14,404,000. 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 $18,223,000 and $26,938,000, respectively, for the
six months ended April 30, 1997.
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 $4,766,000, of which
$2,717,000 expires in 2003 and $2,049,000 in 2004. The fund intends to
retain gains realized in future periods that may be offset by available
capital loss carryforwards.
At April 30, 1997, the aggregate cost of investments for federal income
tax and financial reporting purposes was $175,952,000, and net unrealized
loss aggregated $20,046,000, of which $6,542,000 related to appreciated
investments and $26,588,000 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
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T. ROWE PRICE JAPAN FUND
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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 $99,000 was
payable at April 30, 1997. 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 0.30% for assets in excess of $80 billion. At April 30, 1997,
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.
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. (TRPS) 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. Additionally, the fund is one of several T. Rowe
Price mutual funds (the underlying funds) in which the T. Rowe Price
Spectrum International Fund (Spectrum) invests. In accordance with the
agreement among Spectrum, the underlying funds, Price Associates and
TRPS, expenses from the operation of Spectrum are borne by the underlying
funds based on each underlying fund's proportionate share of assets owned
by Spectrum. The fund incurred expenses pursuant to these related party
agreements totaling approximately $208,000 for the six months ended April
30, 1997, of which $49,000 was payable at period-end.
During the six months ended April 30, 1997, the fund, in the ordinary
course of business, placed security purchase and sale orders aggregating
$21,207,000 with certain affiliates of the manager and paid commissions
of $87,000 related thereto.
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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
410-625-6500 Baltimore area
To open a Discount Brokerage
account or obtain information,
call: 1-800-638-5660 toll free
Internet address:
www.troweprice.com
T. Rowe Price Associates
100 East Pratt Street
Baltimore, Maryland 21202
This report is authorized for
distribution only to shareholders
and to others who have received
a copy of the prospectus of the
T. Rowe Price Japan 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
ARCO Tower
31st Floor
515 South Flower St.
Los Angeles, CA 90071
4200 West Cypress St.
10th Floor
Tampa, FL 33607
[LOGO OF T. ROWE PRICE APPEARS HERE]
T. Rowe Price Investment Services, Inc., Distributor
