- --------------------------------------------------------------------------------
T. Rowe Price
- --------------------------------------------------------------------------------
Annual Report
New Asia Fund
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October 31, 1998
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REPORT HIGHLIGHTS
================================================================================
New Asia Fund
* Asian stock markets again fell sharply during the six months ended
October 31.
* The fund's returns for the past six and 12 months were -11.65% and
-15.97%, respectively, significantly better than both the benchmark index
and the Lipper average.
* We maintained a defensive posture marked by high cash reserves and
avoidance of financial, real estate, and heavily indebted companies.
* Hong Kong remained our largest exposure, followed by Taiwan and India.
* Our near-term outlook is cautious, but proper reforms and stimulation of
consumer demand could spark an exciting new era of growth.
<PAGE>
FELLOW SHAREHOLDERS
The performance of Asian markets was once again sharply negative during
the past six months, though in contrast to the experience of last year, stocks
in the region actually rallied in October. Asian markets declined 12.69% in the
six-month period, and more than 23% over the course of your fund's fiscal year
ended October 31.
================================================================================
Performance Comparison
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Periods Ended 10/31/98 6 Months 12 Months
- --------------------------------------------------------------------------------
New Asia Fund -11.65% -15.97%
MSCI All Country Far East
Free Ex-Japan Index -12.69 -23.05
Lipper Pacific Ex-Japan
Funds Average -15.16 -24.41
================================================================================
In this difficult environment, the fund fell 11.65% over the six months.
This result was better than the performance of the average competitor fund and
ahead of the Morgan Stanley Capital Inter-national benchmark, as shown in the
table. For the 12-month period, your fund's 15.97% decline was significantly
ahead of the MSCI benchmark and the average competitor fund, both of which
suffered much steeper losses. The results can be attributed to the fund's low
exposure to financial, property, and highly indebted companies, which weigh
heavily in the index, and to our relatively high cash position.
Optimism that the world's major central banks would create a supportive
environment for Asia's recovery through lower interest rates fueled a sharp
rally at the end of the period. However, slow progress in bank and corporate
restructuring, a less supportive global marketplace for Asian and emerging
market debt, and signs of a slowdown in U.S. and European demand for Asian
products made us doubt the sustainability of the rally. In our last report, we
wrote that the region's overall environment would likely remain difficult
through 1998 and probably 1999. That continues to be our view.
================================================================================
PREPARING FOR THE YEAR 2000
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The Year 2000 draws closer every day, and it holds special meaning beyond
the arrival of a new millennium. The issue for investors is that many computer
programs throughout the world use two digits instead of four to identify the
year and may assume the next century starts with 1900. If these programs are not
modified, they will not be able to correctly handle the century change when the
year changes from "99" to "00" on January 1, 2000, and they will no longer be
able to perform necessary functions. The Year 2000 issue affects all companies
and organizations.
<PAGE>
T. Rowe Price has been taking steps to assure that its computer systems
and processes are capable of functioning in the Year 2000. Detailed plans for
remediation efforts have been developed and are currently being executed.
OUR PLAN OF ACTION
We began to address these issues several years ago by requiring that all
new systems process and store four-digit years. We plan to complete all
reprogramming efforts for the major application systems, including business
applications required to service our customers and processing infrastructure
necessary to ensure the integrity of customer data and investments, by December
31, 1998, leaving a full 12 months for system testing. Because we exchange data
electronically with customers and vendors, we are working with them to assess
the adequacy of their own compliance efforts. Our goal is to ensure the
continuation of the same level of service to all our mutual fund shareholders
and clients after December 31, 1999.
We are asking all vendors and companies we do business with for a Year
2000 compliance status, with the expectation that some organizations will not be
able to modify their interface files prior to December 31, 1999. Our goal is to
identify any noncompliant files so that we can implement alternative solutions.
In addition, we are scheduling tests for critical vendors and companies that
claim Year 2000 compliance to ensure that time-related data and calculations
function properly as we move into the next century.
SMOOTH TRANSITION PLANNED
We believe our programs and initiatives will provide a smooth transition
into the next millennium. We are assessing all systems providing products or
services to our retail mutual fund shareholders, retirement plan sponsors, and
participants, and we are taking steps to modify them where necessary for the
Year 2000. Our plan provides time to develop solutions for all noncompliant
systems and data files from customers or vendors.
The Securities Industry Association (SIA) is coordinating Year 2000
testing to assure that securities markets, clearing corporations, depositories,
and third party service providers can send, receive, and process files and
transactions accurately. In late July 1998, the SIA completed a beta test of
Year 2000 readiness. The test was considered successful in terms of transactions
completed and will serve as the basis for the SIA's industry-wide approach.
During October 1998, T. Rowe Price completed its beta test of Year 2000
readiness with the SIA and is ready for the industry-wide test that is scheduled
for March and April 1999.
For a more detailed discussion of our Year 2000 effort, as well as
continuing updates on our progress, please check our Web site
(WWW.TROWEPRICE.COM).
================================================================================
<PAGE>
PORTFOLIO REVIEW
The two main thrusts of our strategy, concentrating investments in
relatively defensive business franchises with strong balance sheets and
maintaining a sizable exposure to noncyclical growth companies in India, worked
well during the period of high volatility and sharp price declines of the spring
and summer. However, this strategy and our continuing reluctance to invest in
"asset inflation" companies, such as financials, property, and capital-intensive
cyclicals, meant that the fund did not fully participate in the Asian markets'
recent rally.
================================================================================
MARKET PERFORMANCE
(In U.S. Dollar Terms)
Periods Ended 10/31/98 6 Months 12 Months
- --------------------------------------------------------------------------------
China Free -31.04% -51.62%
Hong Kong 9.60 -0.94
India -31.78 -32.81
Malaysia -56.83 -62.93
Philippines -13.05 -7.73
Singapore -19.80 -22.35
Korea -4.38 -23.37
Taiwan -15.06 -14.10
Thailand -24.85 -27.96
Source: FAMEInformation Services, Inc.; using MSCIindices.
================================================================================
Our strategy at the country level has remained more or less the same.
HONG KONG is the largest allocation at about 45% ofassets. Although we continue
to expect the macroeconomic environment in Hong Kong to remain difficult,
particularly with the ongoing deflation of assets such as property, Hong Kong
has some of the region's financially strongest and best-managed companies, such
as HUTCHISON WHAMPOA. We also retain major holdings in strong groups like CHEUNG
KONG and HONG KONG TELECOMMUNICATIONS, and in CHINA infrastructure companies
like CHINA TELECOM. We expect these companies will not only survive this
downturn but will be well positioned to prosper when the economy eventually
recovers. Our large presence in Hong Kong also reflects our less favorable
outlook for the other Asian markets. However, the Hong Kong Monetary Authority's
unprecedented intervention in the equity market in an effort to support prices
was a disconcerting step away from free market discipline. Nonetheless, we
continue to believe that Hong Kong will successfully defend its currency's peg
to the U.S. dollar. The Hong Kong market was the only one in the region over the
past six months to post a positive return.
<PAGE>
TAIWAN and INDIA have remained fairly constant at around 15% and 11% of
net assets, respectively. Though these economies have been somewhat insulated
from the Asian crisis to date, we do expect them to slow down in response to
weaker export markets and, in India's case, due to the additional constraints of
the government's large fiscal deficit. However, at the company level, we
continue to find attractive investments. In Taiwan, these include globally
competitive technology companies such as ASUSTEK COMPUTER and strong domestic
retail franchises like PRESIDENT CHAIN STORE. In India, we continue to hold
HINDUSTAN LEVER and HDF, which we believe can continue to grow profits because
of new product rollouts and effective cost management.
[Geographic Diversification pie chart here: A pie chart showing Hong Kong
45%; Taiwan 15%; India 11%; Singapore 5%; Philippines 3%; Korea 3%; Thailand 2%;
Other and Reserves 16%]
Our combined exposure to the Southeast Asian markets and SOUTH KOREA
remained low at around 14% of fund assets. We had sold most of our MALAYSIAN
holdings over the preceding 11 months, leaving only a 1% fund exposure when
capital controls were implemented in September. We have since sold the entire
Malaysian position, placing the proceeds in a local currency bank deposit until
exchange controls are lifted.
OUTLOOK
The last six months saw some developments notable for the uncertainty
they created about future Asian economic policy-namely, the Hong Kong Monetary
Authority's massive stock buying spree, Malaysia's decision to impose capital
controls, and large street protests in South Korea, Indonesia, and Malaysia. We
also began to see concrete signs of deflation in many of the region's consumer
price indices. This development is favorable to consumers but highly unfavorable
to financial, real estate, and highly indebted companies, particularly where
there has been little restructuring. Deflation also raises the possibility that
real interest rates will remain positive or indeed increase despite declining
nominal rates.
================================================================================
Industry Diversification
- --------------------------------------------------------------------------------
Percent of Net Assets
4/30/98 10/31/98
Services ................................. 24.2% 24.2%
Finance .................................. 27.0 21.0
Consumer Goods ........................... 8.1 11.6
Multi-industry ........................... 10.4 11.4
Energy ................................... 10.6 11.0
Capital Equipment ........................ 7.4 7.5
Materials ................................ 1.0 --
Reserves ................................. 11.3 13.3
- --------------------------------------------------------------------------------
Total .................................... 100.0% 100.0%
================================================================================
<PAGE>
During the boom years, Asian economic growth was driven by robust capital
investment and exports, with domestic consumption playing a much less important
role. This is less likely to be the case going forward since industry suffers
from huge overcapacity and demand for Asian goods from developed economies
eases. Recent trends in export volumes from South Korea and Singapore suggest
such a slowdown. Should export volume growth slow significantly from here, we
expect another downdraft for most of the Asian economies. Thereafter, however,
economies will likely stabilize, though at a lower level.
Even assuming the eventual recapitalization of the banking sector and
lower nominal interest rates, it is unlikely that industrial Asia will drive an
Asian credit revival and economic recovery, unless coordinated easing by the
world's major industrialized nations results in a very significant pickup in
demand for Asian exports. It will, therefore, be important that governments
encourage greater spending by average consumers, particularly by rural
populations that have been net beneficiaries of the region's devaluations.
However, this will be a more difficult task in urban areas given high job
uncertainty. Should Asia succeed in reviving consumer demand, an exciting era
for growth investors could be inaugurated. Such a change would be likely to
create companies with franchises in new areas, such as services, and a much more
sustainable business model for growth.
We continue to look forward to attractive investment candidates emerging
from corporate restructuring, which we hope will be driven by an increasing
focus on generating returns for stockholders. While little has been accomplished
in terms of corporate restructuring in the year since Asia slipped into
full-blown crisis, we believe the pace of change will pick up as the downturn
persists over the next 12 to 18 months.
We expect that high volatility and thin trading volumes will remain with
us for the foreseeable future. Therefore, the fund's strategy will likely remain
fairly conservative, as it has been for the past year or so. We will deploy our
cash reserves to take advantage of opportunities as they arise. The crisis
represents a chance to build a portfolio of great companies with potential for
strong gains as they emerge from this "trial by fire" and as the region's
underlying strengths slowly reassert themselves.
Respectfully submitted,
/s/
Martin G. Wade
President
November 17, 1998
<PAGE>
T. Rowe Price New Asia Fund
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================================================================================
Portfolio Highlights
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TWENTY-FIVE LARGEST HOLDINGS
Percent of
Net Assets
10/31/98
Hutchison Whampoa, Hong Kong ................................... 10.8%
Cheung Kong Holdings, Hong Kong ................................ 7.5
Hong Kong Telecommunications, Hong Kong ........................ 6.1
CLP Holdings, Hong Kong ........................................ 4.2
Dao Heng Bank Group, Hong Kong ................................. 2.7
- --------------------------------------------------------------------------------
Hong Kong and China Gas, Hong Kong ............................. 2.7
Mahanagar Telephone, India ..................................... 2.6
Cathay Life Insurance, Taiwan .................................. 2.6
Samsung Electronics, South Korea ............................... 2.4
Singapore Telecommunications, Singapore ........................ 2.3
- --------------------------------------------------------------------------------
ITC, India ..................................................... 2.2
HSBC Holdings, Hong Kong ....................................... 1.9
Hindustan Lever, India ......................................... 1.9
President Chain Store, Taiwan .................................. 1.8
Ranbaxy Laboratories, India .................................... 1.6
- --------------------------------------------------------------------------------
Hon Hai Precision Industry, Taiwan ............................. 1.6
New World Infrastructure, Hong Kong ............................ 1.4
Cheung Kong Infrastructure, Hong Kong .......................... 1.3
Compal Electronics, Taiwan ..................................... 1.3
HDF Corporation, India ......................................... 1.3
- --------------------------------------------------------------------------------
Singapore Press, Singapore ..................................... 1.2
Huaneng Power International, China ............................. 1.2
Asustek Computer, Taiwan ....................................... 1.2
Standard Foods Taiwan, Taiwan .................................. 1.1
China Telecom, Hong Kong ....................................... 1.1
- --------------------------------------------------------------------------------
Total .......................................................... 66.0%
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<PAGE>
T. Rowe Price New Asia Fund
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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.
[New Asia Funs SEC graph shown here]
================================================================================
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.
================================================================================
Since Inception
Periods Ended 10/31/98 1 Year 3 Years 5 Years Inception Date
New Asia Fund -15.97% -14.40% -10.02% 2.69% 9/28/90
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>
<TABLE>
T. Rowe Price New Asia Fund
- ------------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period#
====================================================================================================================================
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Year
Ended
10/31/98 10/31/97 10/31/96 10/31/95 10/31/94
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE
Beginning of period ..................... $ 5.95 $ 8.64 $ 8.12 $ 10.07 $ 9.88
Investment activities
Net investment income ........... 0.13 0.09 0.06 0.08 0.06
Net realized and
unrealized gain (loss) .......... (1.07) (2.71) 0.55 (1.07) 0.36
Total from
investment activities ........... (0.94) (2.62) 0.61 (0.99) 0.42
Distributions
Net investment income ........... (0.08) (0.06) (0.09) (0.07) (0.04)
Net realized gain ............... -- (0.01) -- (0.89) (0.19)
Total distributions ............. (0.08) (0.07) (0.09) (0.96) (0.23)
NET ASSET VALUE
End of period ........................... $ 4.93 $ 5.95 $ 8.64 $ 8.12 $ 10.07
Ratios/Supplemental Data
Total return^ ........................... (15.97)% (30.61)% 7.58% (9.70)% 4.11%
Ratio of expenses to
average net assets ...................... 1.29% 1.10% 1.11% 1.15% 1.22%
Ratio of net investment
income to average
net assets .............................. 2.33% 0.76% 0.66% 0.97% 0.85%
Portfolio turnover rate ................. 68.1% 41.8% 42.0% 63.7% 63.2%
Net assets, end of period
(in millions) ........................... $ 633 $ 877 $ 2,041 $ 1,909 $ 2,303
<FN>
^ Total return reflects the rate that an investor would have earned on an investment in the fund during each period, assuming
reinvestment of all distributions.
# All per share figures reflect the 2-for-1 stock split effective 5/27/94. 9
</FN>
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Asia Fund
- --------------------------------------------------------------------------------
October 31, 1998
================================================================================
Portfolio of Investments
Shares/Par Value
- --------------------------------------------------------------------------------
In thousands
CHINA 1.8%
Common Stocks 1.8%
Huaneng Power International ADR (USD) * .............. 559,640 $ 7,695
Shenzhen Expressway (Class H) (HKD) .................. 16,510,000 3,731
Total China (Cost $15,562) ........................... 11,426
HONG KONG 44.9%
Common Stocks and Warrants 44.9%
CLP Holdings ......................................... 4,713,000 26,714
Cheung Kong Holdings ................................. 6,969,000 47,690
Cheung Kong Infrastructure ........................... 3,338,000 8,490
China Telecom ........................................ 3,672,000 6,898
Citic Pacific ........................................ 1,736,000 4,281
Cosco Pacific ........................................ 8,174,000 4,010
Dao Heng Bank Group .................................. 8,269,260 17,190
Dickson Concepts International ....................... 1,433,500 1,388
Esprit Holdings ...................................... 8,277,000 3,099
Great Eagle Holdings, Warrants, 11/30/98 * ........... 352,999 1
HKR International .................................... 10,141,344 5,729
HSBC Holdings ........................................ 534,678 12,254
Hong Kong and China Gas .............................. 11,854,700 16,837
Hong Kong and China Gas, Warrants, 9/30/99 * ......... 315,350 33
Hong Kong Telecommunications ......................... 19,313,977 38,653
Hutchison Whampoa .................................... 9,546,000 68,406
Hysan Development .................................... 3,667,000 4,451
Lai Sun Hotels International, Warrants, 4/30/99 * .... 652,286 1
Legend Holdings ...................................... 5,648,000 1,901
Li & Fung ............................................ 42,000 66
New World Infrastructure ............................. 6,264,200 8,937
Sa Sa International Holdings ......................... 15,237,000 1,180
Smartone Telecommunications .......................... 975,000 2,770
Wing Hang Bank ....................................... 1,567,000 2,984
Total Hong Kong (Cost $283,827) ...................... 283,963
INDIA 11.2%
Common Stocks 11.2%
HDF Corporation ...................................... 156,120 $ 8,222
Hindustan Lever ...................................... 314,500 11,897
Hindustan Petroleum .................................. 618,800 3,887
ITC .................................................. 850,000 14,102
Industrial Credit & Investment Corporation of India .. 6,388,800 6,144
Mahanagar Telephone .................................. 3,798,000 16,402
Ranbaxy Laboratories ................................. 855,500 10,079
State Bank of India .................................. 17,000 63
Total India (Cost $92,225) ........................... 70,796
<PAGE>
INDONESIA 0.7%
Common Stocks 0.7%
Gulf Indonesia Resources (USD) * ..................... 472,000 4,661
Total Indonesia (Cost $9,163) ........................ 4,661
MALAYSIA 0.9%
Short-term Investments 0.9%
Chase Manhattan Bank, N.A., Fixed Deposit
5.00 - 5.50%, 1/22 -1/29/99 ..........MYR.... 25,861,638 5,831
Total Malaysia (Cost $5,823) ......................... 5,831
PHILIPPINES 3.3%
Common Stocks 3.3%
Ayala Land ........................................... 12,986,961 3,943
Bank of the Philippine Islands ....................... 1,105,650 2,137
La Tondena Distillers * .............................. 4,832,800 2,815
Philippine Long Distance Telephone ................... 167,000 3,994
Philippine Long Distance Telephone ADS (USD) ......... 100,000 2,437
San Miguel (Class B) ................................. 2,963,550 4,370
Universal Robina ..................................... 11,588,000 919
Total Philippines (Cost $37,070) ..................... 20,615
SINGAPORE 4.8%
Common Stocks 4.8%
Singapore Airlines ................................... 314,000 $ 1,929
Singapore Press ...................................... 891,419 7,723
Singapore Technologies Engineering ................... 6,173,000 6,069
Singapore Telecommunications ......................... 8,609,000 14,864
Total Singapore (Cost $32,917) ....................... 30,585
SOUTH KOREA 2.9%
Common Stocks 2.9%
Korea Electric Power ................................. 179,000 3,188
Samsung Electronics .................................. 365,875 14,973
Total South Korea (Cost $20,287) ..................... 18,161
<PAGE>
TAIWAN 15.1%
Common Stocks 15.1%
Asustek Computer * ................................... 424,433 3,142
Asustek Computer GDR (USD) * ......................... 547,500 4,189
Asustek Computer GDR (144a) (USD) * .................. 1,079 8
Bank Sino Pacific .................................... 9,968,488 4,258
Cathay Life Insurance ................................ 4,626,200 16,336
China Trust Commercial Bank .......................... 1,713,569 1,194
Chuntex Electronics .................................. 2,435,980 2,817
Compal Electronics ................................... 2,704,500 8,424
Compeq Manufacturing ................................. 623,000 3,958
D-Link Corporation ................................... 1,916,000 4,225
Far East Textile ..................................... 6,601,320 4,601
Far Eastern Silo & Shipping .......................... 11,131,460 6,077
Hon Hai Precision Industry ........................... 2,047,000 9,848
President Chain Store ................................ 3,651,716 11,656
Standard Foods Taiwan ................................ 3,405,000 6,931
Taiwan Semiconductor Manufacturing ................... 2,357,650 4,763
Yageo ................................................ 2,127,000 2,801
Total Taiwan (Cost $97,730) .......................... 95,228
THAILAND 2.0%
Common Stocks 2.0%
PTT Exploration & Production ......................... 739,600 $ 6,843
Siam Makro ........................................... 3,274,000 5,970
Total Thailand (Cost $14,279) ........................ 12,813
VIETNAM 0.0%
Common Stocks 0.0%
Lazard Vietnam Fund Limited (USD) * .................. 152,800 153
Total Vietnam (Cost $462) ............................ 153
SHORT-TERM INVESTMENTS 12.2%
Money Market Funds 12.2%
Reserve Investment Fund, 5.41%# ...................... 77,083,117 77,083
Total Short-term Investments (Cost $77,083) .......... 77,083
Total Investments in Securities
99.8% of Net Assets (Cost $686,428) .................. $ 631,315
Other Assets Less Liabilities ........................ 1,521
NET ASSETS ........................................... $ 632,836
* Non-income producing
# Seven-day yield
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
0.001% of net assets.
ADR American depository receipt
ADS American depository share
GDR Global depository receipt
HKD Hong Kong dollar
USD U.S. dollar
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Asia Fund
- --------------------------------------------------------------------------------
October 31, 1998
================================================================================
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
In thousands
Assets
Investments in securities, at value (cost $686,428) .......... $ 631,315
Securities lending collateral pool ............................ 112,168
Other assets .................................................. 7,443
Total assets .................................................. 750,926
Liabilities
Securities lending collateral ................................. 112,168
Other liabilities ............................................. 5,922
Total liabilities ............................................. 118,090
NET ASSETS .................................................... $ 632,836
Net Assets Consist of:
Accumulated net investment income - net of distributions ...... $ 10,470
Accumulated net realized gain/loss - net of distributions ..... (375,867)
Net unrealized gain (loss) .................................... (55,056)
Paid-in-capital applicable to 128,437,298 shares of
$0.01 par value capital stock outstanding;
2,000,000,000 shares of the Corporation authorized ............ 1,053,289
NET ASSETS .................................................... $ 632,836
NET ASSET VALUE PER SHARE ..................................... $ 4.93
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Asia Fund
- --------------------------------------------------------------------------------
================================================================================
Statement of Operations
- --------------------------------------------------------------------------------
In thousands
Year
Ended
10/31/98
Investment Income
Income
Dividend ............................................. $ 19,262
Interest ............................................. 6,132
Total income ......................................... 25,394
Expenses
Investment management ................................ 5,779
Shareholder servicing ................................ 2,671
Custody and accounting ............................... 270
Prospectus and shareholder reports ................... 236
Registration ......................................... 50
Legal and audit ...................................... 32
Directors ............................................ 7
Miscellaneous ........................................ 14
Total expenses ....................................... 9,059
Net investment income ........................................ 16,335
Realized and Unrealized Gain (Loss)
Net realized gain (loss)
Securities ........................................... (369,564)
Foreign currency transactions ........................ (3,873)
Net realized gain (loss) ............................. (373,437)
Change in net unrealized gain or loss
Securities ........................................... 225,328
Other assets and liabilities
denominated in foreign currencies .................... 2,195
Change in net unrealized gain or loss ................ 227,523
Net realized and unrealized gain (loss) ...................... (145,914)
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS ....................................... $(129,579)
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
T. Rowe Price New Asia Fund
- ------------------------------------------------------------------------------------------------------------------------------------
====================================================================================================================================
Statement of Changes in Net Assets
- ------------------------------------------------------------------------------------------------------------------------------------
In thousands
<CAPTION>
Year
Ended
10/31/98 10/31/97
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations
Net investment income .................................................... $ 16,335 $ 14,020
Net realized gain (loss) ................................................. (373,437) 35,520
Change in net unrealized gain or loss .................................... 227,523 (400,999)
Increase (decrease) in net assets from operations ........................ (129,579) (351,459)
Distributions to shareholders
Net investment income .................................................... (11,046) (14,114)
Net realized gain ........................................................ -- (2,352)
Decrease in net assets from distributions ................................ (11,046) (16,466)
Capital share transactions *
Shares sold .............................................................. 490,917 731,778
Distributions reinvested ................................................. 10,444 15,555
Shares redeemed .......................................................... (604,687) (1,544,017)
Increase (decrease) in net assets from capital
share transactions ....................................................... (103,326) (796,684)
Net Assets
Increase (decrease) during period ................................................ (243,951) (1,164,609)
Beginning of period .............................................................. 876,787 2,041,396
End of period .................................................................... $ 632,836 $ 876,787
*Share information
Shares sold .............................................................. 95,986 84,243
Distributions reinvested ................................................. 1,852 1,698
Shares redeemed .......................................................... (116,741) (174,870)
Increase (decrease) in shares outstanding ................................ (18,903) (88,929)
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
T. Rowe Price New Asia Fund
- --------------------------------------------------------------------------------
October 31, 1998
================================================================================
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 New Asia Fund (the fund), a
diversified, open-end management investment company, is one of the portfolios
established by the corporation and commenced operations on September 28, 1990.
The accompanying financial statements are prepared in accordance with
generally accepted accounting principles for the investment company industry;
these principles may require the use of estimates by fund management.
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.
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 in local currency which
approximates fair value.
Investments in mutual funds are valued at the closing net asset value per
share of the mutual fund on the day of valuation.
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.
<PAGE>
PREMIUMS AND DISCOUNTS Premiums and discounts on debt securities are
amortized for both financial reporting and tax purposes.
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, 1998, 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.
SECURITIES LENDING The fund lends its securities to approved brokers to
earn additional income and receives cash and U.S. Treasury securities as
collateral against the loans. Cash collateral received is invested in a money
market pooled account by the fund's lending agent. Collateral is maintained over
the life of the loan in an amount not less than 100% of the value of loaned
securities. Although 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. At October 31, 1998, the value of
loaned securities was $109,139,000; aggregate collat eral consisted of
$112,168,000 in the securities lending collateral pool and U.S. Treasury
securities valued at $2,000,000.
OTHER Purchases and sales of portfolio securities, other than short-term
securities, aggregated $419,748,000 and $481,594,000, respectively, for the year
ended October 31, 1998.
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 $373,612,000, of which $2,099,000 expires in
2003, and $371,513,000 in 2006. The fund intends to retain gains realized in
future periods that may be offset by available capital loss carryforwards.
<PAGE>
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, 1998. The results
of operations and net assets were not affected by the increases/(decreases) to
these accounts.
- --------------------------------------------------------------------------------
Undistributed net investment income $(3,271,000)
Undistributed net realized gain 3,271,000
At October 31, 1998, the cost of investments for federal income tax
purposes was substantially the same as for financial reporting and totaled
$686,428,000. Net unrealized loss aggregated $55,113,000 at period end, of which
$37,922,000 related to appreciated investments and $93,035,000 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 $407,000 was payable
at October 31, 1998. 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 October 31, 1998, and for the year then ended, the
effective annual group fee rate was 0.32%. 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. The fund incurred expenses
pursuant to these related party agreements totaling approximately $2,167,000 for
the year ended October 31, 1998, of which $238,000 was payable at period-end.
<PAGE>
Additionally, the fund is one of several T. Rowe Price-sponsored mutual
funds (underlying funds) in which the T. Rowe Price Spectrum Funds (Spectrum)
may invest. Spectrum does not invest in the underlying funds for the purpose of
exercising management or control. Expenses associated with the operation of
Spectrum are borne by each underlying fund to the extent of estimated savings to
it and in proportion to the average daily value of its shares owned by Spectrum,
pursuant to special servicing agreements between and among Spectrum, the
underlying funds, T. Rowe Price, and, in the case of T. Rowe Price Spectrum
International, Rowe Price-Fleming International. Spectrum International Fund
held approximately 0.1% of the outstanding shares of the New Asia Fund at
October 31, 1998. For the year then ended, the fund was allocated $12,000 of
Spectrum expenses, $3,000 of which was payable at period-end.
The fund may invest in the Reserve Investment Fund and Government Reserve
Investment Fund (collectively, the Reserve Funds), open-end management
investment companies managed by T. Rowe Price Associates, Inc. The Reserve and
Government Reserve Funds are offered as cash management options only to mutual
funds and other accounts managed by T. Rowe Price and its affiliates and are not
available to the public. The Reserve Funds pay no investment management fees.
Distributions from the Reserve Funds to the fund for the year ended October 31,
1998, totaled $4,644,000 and are reflected as interest income in the
accompanying Statement of Operations.
During the year ended October 31, 1998, the fund, in the ordinary course
of business, placed security purchase and sale orders aggregating $132,070,000
with certain affiliates of the manager and paid commissions of $443,000 related
thereto.
================================================================================
TAX INFORMATION (UNAUDITED) FOR THE TAX YEAR ENDED 10/31/98
- --------------------------------------------------------------------------------
We are providing this information as required by the Internal Revenue
Code. The amounts shown may differ from those elsewhere in this report because
of differences between tax and financial reporting requirements.
The fund will pass through foreign source income of $10,907,000 and
foreign taxes paid of $807,000.
================================================================================
<PAGE>
T. Rowe Price New Asia Fund
- --------------------------------------------------------------------------------
================================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS OF T. ROWE PRICE INTERNATIONAL FUNDS, INC. AND
SHAREHOLDERS OF NEW ASIA FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, 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 New Asia Fund (one of the
portfolios consti-tutin g T. Rowe Price International Funds, Inc., hereafter
referred to as the "Fund") at October 31, 1998, 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, 1998 by correspondence with the
custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
November 18, 1998
<PAGE>
FOR YIELD, PRICE, LAST TRANSACTION,
CURRENT BALANCE, OR TO CONDUCT
TRANSACTIONS, 24 HOURS, 7 DAYS
A WEEK, CALL TELE*ACCESS [REGISTRATION MARK]:
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 New Asia 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
T. Rowe Price Investment Services, Inc., Distributor. F39-050 10/31/98
